I was wondering to myself what Iraq's oil production has been like lately in the face of rising prices. We would expect from the law of supply for it to increase, ceteris paribus. However, no reasonable person would suggest that ceteris paribus would hold here. Clearly from the above graph, which is in million bbl/d, they have not returned to pre-"Operation Freedom" levels yet. It is hard to know what their true production potential is because they are at war a minimum of 10 of the 27 years of data (1980-1988 with Iran, 1991 with the U.N., and 2003 - when and if you consider Operation Freedom to be over).
4 comments:
Certainly wouldn't expect it given that Iraqi oil production operates in a distinctly non-market situation. Higher prices only drive more production when the profits from doing so can be realized. TPS had something on this a while ago, I'd have to parse through the archives...
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