It's all about the light, sweet crude

Welcome to the first Energy War of the 21st century. And get used to it, because unless we change our ways in a big, big hurry, wars over energy will be a constant. They are already well on the way to becoming a way of life.

Amid the furor of civil war and sectarian strife, car bombings and executions, a piece of legislation is wending it's way through the Iraqi legislative system, and will be presented to the cabinet and parliament in a few days. Odds are it will pass with little attention paid to the matter.

That is too bad. What the new oil law - which the United States has helped draft, craft and push through - does is feather the nest of big oil. The provisions of the oil law are a radical departure from the norm for developing countries: under a system known as "production-sharing agreements", or PSAs, major oil players, such as BP and Shell in Britain, and Exxon and Chevron in the US, would be able to make contracts that lock up access to oil reserves for up to 30 years.

Iraq is the third-largest oil reserve in the world, behind only Saudi Arabia and Iran. Both Saudi Arabia and Iran operate tightly-controlled nationalized oil companies. Iraqi oil production was nationalized from 1972 until the fall of Saddam Hussein.

Iraq is over an oil barrel. Two decades of war and sanctions have decimated the oil infrastructure. Refineries, pumping stations, pipelines - all are in disrepair. Massive investment will be required, of that there is no doubt. This need for infrastructure will drive the PSA's to be weighted in the favor of the big-oil giants who will be entering in to the contracts with the Iraqi government.

The PSA's would allow the large foreign oil companies to retain about 75% of all revenues realized on the sale of Iraqi crude oil. Control over the third largest oil reserves on the planet will be in the hands of the petroleum industry, virtually unchecked. The civil war that foments desperation today will end, hopefully long before those oil contracts will, and soon after hostilities cease, the makers of those contracts will start to feel cheated - with no mechanism for remediation.

It is a bad piece of legislation, and that the United States had a hand in generating it is a disgrace, and proof enough that the peaceniks with their "No Blood for Oil" signs were absolutely right from the very beginning.

It turns out, it was that simple afterall.