“They’re opening them (oil fields) up to other companies all over the world … We’re entitled to it,” Pickens said of Iraq’s oil. “Heck, we even lost 5,000 of our people, 65,000 injured and a trillion, five hundred billion dollars.”

Osama bin Laden, 2007:

AL-Qaeda leader Osama bin Laden has accused the US of plotting to take control of Iraqi oil supplies and he urged Iraqis to reject efforts to rebuild a US-backed national unity government.

In the future, how about not publicly saying things that reinforce bin Laden’s view of the world?

The report totals government expenditures on different energy sources, both in direct spending and in foregone revenue resulting from tax breaks. It found that while the government spent $72.5 billion on fossil fuels between 2002 and 2008, it spent just $29 billion on renewables. And if the subsidies for corn ethanol – which is of questionable environmental benefit – aren’t included on the renewables side, the government spent just $12.2 billion on renewable energy over that period.

The government directly spent $16.3 billion on petroleum, natural gas, and coal products, and gave the industry another $53.9 billion in the form of tax breaks. Another $2.3 billion was used for carbon-capture-and-storage technology, nearly all of that in the form of direct government spending. A large portion of that spending — $15.3 billion – is actually designed to support overseas production of oil through the Foreign Tax Credit, which allows U.S. companies to avoid domestic taxes if they have paid royalties in the country of origin.

For renewables, the government allocated just $6.2 billion on tax breaks and $6 billion in direct expenditures. And while most fossil fuel subsidies are written into the U.S. Tax Code as permanent provisions, most subsidies for renewables are short-term provisions included in energy bills or other legislative measures, which has limited their usefulness to the industry.

But Joe Romm counters that the program will pay for itself in less than five years, and so we’re essentially making environmental gains at no cost. Cash for clunkers is expected to save around 72 million gallons of gasoline each year. At $3 a gallon (Romm considers this a conservative estimate for the coming years), that amounts to $216 million in annual gasoline savings. At this rate, the $1 billion that’s been allocated to cash for clunkers so far would be more than paid for in a half decade.

Romm maintains that cash for clunkers is not primarily an environmental program, though its green benefits are certainly a plus. Instead, it has important economic and national security implications:

The majority of the $200+ million a year in gasoline savings would have left the country, since we import nearly 2/3 of our oil (and probably a higher fraction of marginal increases in oil use). Now that money stays in the pockets of consumers, who will save some of it and spend the rest of it, circulating most of the money in this country rather than overseas.

Liberal environmentalists have been highly skeptical of the program’s modest fuel-economy provisions, which require an efficiency improvement of just 4 miles per gallon. But so far, the average gain from the program’s trade-ins has been nearly 10 miles per gallon. Despite quibbles over the details, there seems to be a growing consensus about the program’s overall effectiveness.

Beijing recognizes that a nuclear-armed Iran would almost certainly be detrimental to its energy security. Iran’s development of a nuclear weapons capability — and the regional nuclear arms race this might trigger — would foster instability in the Persian Gulf, jeopardizing the free flow of oil into the market. It could also strain China’s relationship with Saudi Arabia, which has been China’s top crude oil supplier for most of this decade and opposes Iran’s going nuclear. And despite appearances, China does not want to jeopardize its relationship with the United States. Not only does Beijing value its relations with Washington more than its ties to Tehran, but it relies on the U.S. Navy to protect the sea lanes between the Persian Gulf and China.

These are good reasons to believe that the Chinese would back an international effort to ensure the Iranian nuclear program doesn’t have a military dimension. They already do. But this alone doesn’t get you Chinese endorsement or acquiescence of punitive measures. If I understand FP’s point correctly, the Saudis would have to threaten to cut off Chinese oil imports to ensure China’s complicity in an oil-sanctions regime. But would they? Not only have the Saudis not stated support for such an embargo, the Saudis didn’t even support an oil embargo over the Gaza war. We’re a couple of billiard-shots away from this policy coming together. Maybe it could, but it doesn’t seem likely. We’re far from getting Russian support, on top of all this.

On his FP blog, Dan Drezner had this to say:

In fact, here’s a good time-saver:  if you read any story about a gasoline embargo [of] Iran, just scan quickly and get to the part where the reporter explains how and why Russia and China would go along.  If it’s not mentioned, the story is inconsequential.

As Dan says, quoting the ever-talented Belle Waring, this is shaping up to be quite the pony-wishing exercise.

There’s plenty of evidence to suggest prices should be falling. In industrialized countries, storage tanks are overflowing, with enough supplies to cover 62 days of use, about 10 days more than usual. Economic weakness continues to depress world demand, which is on track to fall for the second consecutive year. And oil-producing countries, while restraining output, are adding to production capacity. New Saudi Arabian wells coming on line this year will exceed the entire production capacity of Texas.

That first data point — overflowing storage tanks — is all about contango. That is, the price of oil for future delivery is higher than the current price; markets think oil will be more expensive in the future. The natural thing to do in such a circumstance is to buy oil now and store it until later. This is more cost effective than usual, given the levels of current interest rates.

What about the broader story — that economic fundamentals don’t justify the increase? Well, oil prices are expectations driven. It’s a scarce commodity, and supply can’t respond immediately to demand. Early this year, demand forecasts were tumbling even as production remained elevated, a holdover from the 2008 price spike. These dynamics have changed sharply. While the global economy remains depressed, the outlook is considerably more positive than it was back in January. Meanwhile, the economic collapse and credit market freeze shut down many of the efforts to gear up exploration and production which had been begun last summer. Market fundamentals are pointing toward a higher price.

So, too, are financial conditions. Low interest rates and a falling dollar are generally good for an American recovery, but both also tend to support oil prices. There’s a difficult balance to be walked there. Rising oil prices act like a large tax increase on American consumers, which is bad news for the economy. Rising crude prices are like a parachute attached the back of the American economy; the faster we go, the more that parachute exerts a drag. It’s tough to get up to speed under such circumstances.

The budget squeeze is also heightening concerns about the Shiite-led Iraqi government’s ability to continue paying U.S.-formed — and formerly U.S.-funded — Sunni paramilitary groups that are now working under its supervision. The government promised to shift 20 percent of the 94,000 men in those groups to security jobs, but because of the hiring freeze, fewer than 5,000 of them have made the transition.

In recent months, many Sunni guards have walked away from their checkpoints after working unpaid for months. U.S. officials fear that the dissolution of the groups could refuel the insurgency, widen the sectarian divide and destabilize the government.

Beyond the reconciliation issue, Londono reports that the Iraqis may face problems with preparedness to face external threats, as money dries up to supply the country’s tiny air force, navy and border guard. To go far out in the realm of speculation, watch to see if that becomes a pretext for the Iraqi military to request revisions to the U.S.-Iraq Status of Forces Agreement holding a total U.S. troop departure by the end of 2011. Senior Iraqi military commanders have often said that they want the United States to leave when they’re able to take control. We can argue whether Iraq isn’t already seeing foreign-sponsored aggression against it, but the implicit premise in London’s reporting is that Iraq won’t be prepared for a major conventional conflict with one of its neighbors. How likely is that, though?

First, the context. The Kurds have oil reserves inside the Kurdistan Regional Government that, by some estimates, rival Nigeria’s. Naturally, they claim the right to that oil — it’s under their land, after all — as a natural resource that will bankroll a viable independent Kurdistan one day. Losing that oil will be a disaster for Iraqi Arabs. While Iraq has been preoccupied by occupation and insurgency, the Kurds have moved forward with the development of the oil fields, inking deals with wildcatting oil companies at very favorable prices. The catch is that it’s been unclear what happens to that oil, since the Iraqi government has reserved the exclusive right to the fields that contain it.

The details of the deal are unclear, The Times reports, but here’s what appears to be the substance of it:

Under the terms, the Kurds can begin exporting about 60,000 barrels of oil a day from the Tawke field starting on June 1, and an additional 40,000 barrels a day from a second field, Taq-Taq, later in the month. The oil will be marketed by the central government and all revenue will go to Baghdad, said Asim Jihad, chief spokesman of the Oil Ministry.

Sending “all revenue” to Baghdad, with the central government “market[ing]” the oil makes it unclear what the Kurds actually get out of this deal, as The Times notes. One answer: the Kurds want the Baghdad government to simply recognize their claim to the oil. Once that happens, the Kurds can drive a harder bargain in the ongoing negotiations over the hydrocarbon law, which will supposedly delineate how Iraq’s various ethnic and sectarian and regional interests will each benefit (or lose out) from the nation’s oil bounty. And there’s an additional issue at stake: now that Iraqi Arabs are recognizing Kurdish oil claims, the Kurds have more incentive to expand the territory they control, into oil-rich disputed regions under Baghdad’s control, like Kirkuk, that they’ve long claimed.

More as soon as the terms of the deal become clearer.

But then I reviewed the photos I took at the hearing. Turns out Chu may have been a bit baffled after all:

Here’s his math: 2 million 2010 Toyota Priuses would cost $46 billion and, at 50 miles per gallon, would reduce gasoline consumption by 1.4 billion gallons a year. That’s equivalent to 17 days’ worth of OPEC oil (we use 83 million gallons a day). Continue giving out 2 million cars annually for ten years, and now we’ve eliminated the need for 170 days’ worth of OPEC crude each year.

Sure, it’s impossible for about a thousand reasons. But on a hypothetical level, it actually makes some sense. Neil writes:

Crazy? Really? I would like to hear of another plan that in 10 years and at a cost of $400 billion (probably high, since we’d be buying in such bulk) could achieve such bankable savings in foreign oil, trade and carbon.

Public transportation? Please. We could hire Las Vegas showgirls as conductors and people still wouldn’t take light rail. As for the objection that such a thought experiment constitutes wild, stark-staring collectivism, let’s offer a free Prius to a few hundred thousand Texans and see if they decline out of free-market principle.

But I have a feeling Detroit and its lobbyists might decline. Still, a few strong and well-placed incentives could help persuade Motor City to shift its resources to hybrids and American consumers to buy them. The impact, as Neil points out, could be huge.

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Win a free Prius when you follow TWI on Twitter! Well, no. Not really — but it’s still worthwhile.

At least the oil companies don’t. The New York Times reports that they’re going to get a present: as much as a 75 percent stake in Iraq’s oil and gas fields:

Under a formal process created last year, companies have been asked to bid openly for the right to take part in expanding Iraq’s oil production. But many companies have been skeptical of the country’s terms, saying they lacked enough incentives. At the same time, Iraq’s improved security has meant that foreign companies are eager to invest in the country after decades of wars and sanctions kept them out.

Iraq’s oil minister, Hussain al-Shahristani, addressing a conference hosted by OPEC in Vienna on Wednesday, also suggested for the first time that Iraq would consider allowing foreign companies to share directly in the profits from oil production, rather than the fixed fees in the joint ventures that are now offered.

So the Iraqi government is offering a fire sale on its oil sector to multinational oil companies. Transparency International’s 2008 corruption index ranked Iraq as 178 out of 180, indicating Iraq’s severe corruption environment. Obviously Iraq needs a healthy economy, and obviously a healthy economy requires investment. But is it too cynical to ask what Shahristani and others might get out of this deal?

Six years ago today the United States invaded Iraq.