Oil Policy Iran and Iraq

This was an interesting article that compared the oil policies of both Iran and Iraq. In an effort to appease their populations, both the government of Iraq and Iran implemented a policy that allowed gas to be sold under half a dollar. This was ill advised because both governments ultimately had to import gasoline (odd, for gas-producing nations) and subsidize it to maintain those cheap prices.

Iraq changed their policy to raise the price of gas to above a dollar in 2006. By the time this article was written, in 2007, Iran tried to implement a similar reform, but riots broke out in response.

As a result, the gas prices between Iran and Iraq varied greatly, which led to a black market for Iranian oil. Sellers took Iranian oil and sold them at cheaper prices to Iraqis. Iran’s economic condition was suffering from these transactions because it was also the Iraqi population that benefited from Iran-subsidized oil.

This article clearly explained to me how a black market is encouraged when governments differently approach the issue of, for example, oil policy. From the perspective of the Iranian-oil dealers, it is interesting how simply jumping a border and entering a different “space” can promise so much more profit than doing the same activity in the previous space. This, of course, is not a new idea.

Space, in this sense, is obviously key in determining black market activity. It was the policy differences of these countries that determined the supply and demand for black market oil.