.Iraq’s black market provides unexpected economic advantages
This is the 28th in a series of “letters home” from a local Marine deployed for a second tour in Iraq.
Economic activity is one of the indicators of the success of the security mission that we are conducting. In order to understand economic activity in the area, information must be gathered and analyzed.
That’s where I come in. My missions take me to a wide area in and around the cities of Fallujah and Habbaniyah, where I can talk to a wide variety of merchants.
Economic activity is exploding (pardon the word) due to the central bank of Iraq extending lines of credit. This development is quite recent and has caused a noticeable increase in economic activity. The main highways are now clogged with trucks transporting everything from air conditioners to plastic lawn furniture.
One of the main commodities that I keep track of is fuel. No matter what the price is or where in the world you are, it is too high. All the fuel that Iraqis get is from the black market.
Fuel is subsidized by the Iraqi government and has a price ceiling that is meant to keep it affordable to everyone. I have yet to find out what that price is, but it is too low to ensure market equilibrium.
As far as I have been able to piece together, the black market for fuel works as follows: The truck driver picks up, say 1,000 gallons of fuel, at the refinery. Let’s say the government price for the fuel is $1 a gallon. The driver is then to take the fuel to the filling station and get paid the $1,000 to take back to the refinery.
Instead of taking it to the filling station, he sells it to the black market for $1.50 a gallon, takes the thousand back to the refinery and pockets the rest. The black market then sells the fuel for an equilibrium price.
I have grown to appreciate the black market, and I see it as a positive factor in our area. By raising the cost of fuel, it ensures that more is shipped to our area, meaning more people are able to get it in the long run than if they had to wait for the government ration.
The value added to the fuel by the black market employs many people who would not have jobs. If it was not for the black market, these people may be turning to insurgent activities to make a living. More available fuel and more jobs lead to more economic activity in all sectors. The black market equals the free market.
Iraq is currently refining all the oil it needs for domestic consumption and no longer has to import refined oil. Iran cannot make the same claim. In fact, refined Iraqi oil is being sent on the black market to Iran. At current prices, a lot of Iranian money is being sent to Iraq via the black market.
In case you were wondering, fuel in my area on the black market is around $2 a gallon. Unrefined oil is about the same price, so they are getting one heck of a deal.
Weix, an Elmwood native, serves with the 24th Marine Regiment out of Madison as a platoon sergeant for Weapons Platoon, “G” Company, 2nd Battalion.
Dunn Connect
Economic activity is one of the indicators of the success of the security mission that we are conducting. In order to understand economic activity in the area, information must be gathered and analyzed.
That’s where I come in. My missions take me to a wide area in and around the cities of Fallujah and Habbaniyah, where I can talk to a wide variety of merchants.
Economic activity is exploding (pardon the word) due to the central bank of Iraq extending lines of credit. This development is quite recent and has caused a noticeable increase in economic activity. The main highways are now clogged with trucks transporting everything from air conditioners to plastic lawn furniture.
One of the main commodities that I keep track of is fuel. No matter what the price is or where in the world you are, it is too high. All the fuel that Iraqis get is from the black market.
Fuel is subsidized by the Iraqi government and has a price ceiling that is meant to keep it affordable to everyone. I have yet to find out what that price is, but it is too low to ensure market equilibrium.
As far as I have been able to piece together, the black market for fuel works as follows: The truck driver picks up, say 1,000 gallons of fuel, at the refinery. Let’s say the government price for the fuel is $1 a gallon. The driver is then to take the fuel to the filling station and get paid the $1,000 to take back to the refinery.
Instead of taking it to the filling station, he sells it to the black market for $1.50 a gallon, takes the thousand back to the refinery and pockets the rest. The black market then sells the fuel for an equilibrium price.
I have grown to appreciate the black market, and I see it as a positive factor in our area. By raising the cost of fuel, it ensures that more is shipped to our area, meaning more people are able to get it in the long run than if they had to wait for the government ration.
The value added to the fuel by the black market employs many people who would not have jobs. If it was not for the black market, these people may be turning to insurgent activities to make a living. More available fuel and more jobs lead to more economic activity in all sectors. The black market equals the free market.
Iraq is currently refining all the oil it needs for domestic consumption and no longer has to import refined oil. Iran cannot make the same claim. In fact, refined Iraqi oil is being sent on the black market to Iran. At current prices, a lot of Iranian money is being sent to Iraq via the black market.
In case you were wondering, fuel in my area on the black market is around $2 a gallon. Unrefined oil is about the same price, so they are getting one heck of a deal.
Weix, an Elmwood native, serves with the 24th Marine Regiment out of Madison as a platoon sergeant for Weapons Platoon, “G” Company, 2nd Battalion.
Dunn Connect
posted by madtom at 10:44 PM
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