Managing Iraq's Oil

In recent months, Iraq's oil production has grown to more than two million barrels per day. At this rate, current oil output and oil exports now exceed post-invasion predictions. Experts had argued that funding shortages, lack of security, the problems of stabilizing a legitimate government, and technology shortfalls would severely limit Iraq's output. Despite the odds, Iraq's daily output reached a post-invasion record of 2.5 million barrels in March.

A number of factors enabled Iraq to increase its output. Most significantly, the Bush administration gave Iraq $2.3 billion to restore its oil production. After the invasion, no one expected Iraq to get loans, let alone outright grants. Instead, $2.3 billion was invested directly into the Iraqi oil sector. To protect the oil fields and other facilities, the Americans dedicated a massive, overwhelming force of soldiers and private contractors. The level of protection was unprecedented even compared to Saddam's regime.

On the technical side, the Bush administration hired the world's best oil service companies to revamp Iraq's technologically challenged oil fields. They still have a long way to go, but significant improvements are already evident. Moreover, the war didn't change the quality of Iraqi fields, which are still among the richest in the world and can produce oil with relatively little effort and investment.

Finally, high oil prices in the past 12 months provided an unexpectedly large windfall to the Iraqi budget, allowing for the financing of other sectors without slighting the oil industry. High prices also enabled the Coalition Provisional Authority to add even more private security personnel to protect refineries and pipelines.