The American University in Cairo School of Economy Management Department Master of Public Policy and Administration unit

Refined Fuel Supply Shortfall & Its Effects on the Iraqi economy and public
A research Paper By

Kaa’ed A. Ali

Supervised by

Dr. Jennifer Bremer
Professor & Unit Director of MPPA Program Associate

2008

Content
Page

Introduction
1. Executive description of the GoI and MoO
............... 4 ...

2. Brief description of the fuel supply shortfall, its causes, and its effects ..
................... 4

Causes behind fuel supply shortfall in Iraq
1. Governmental malfunctioning
.............. 7 .............

"The absence of a real governmental central plan to integrate the work of all ministries." 2. Governmental monopoly ..........
................. 7

3. Corruption
.................. 8

...........

"and religious militias' control to make money." 4. Unstable Security Situation .............
................ 8

"And terrorists' sabotages that affect fuel transportation" 5. Shortage of Electricity Supply to the Refineries . . .
................ 9

Effects of this shortfall
1. Fuel supply shortfall's effects on the economic activities and financial situation of householders in Iraqi: • Expensive transportation that affects trading activities . . . . . . . 11 • Increasing manufacturing costs and low productivity . . . . . . . . 12 of most private and public industrial enterprises • Fuel black market that offers nonproductive jobs for . . . . . . . 13 millions of Iraqis • Householders' financial balances
. . . . . . . . . . 14

2. Fuel supply shortfall's effects on public services :

2

• • •

Power plant low productivity
. . . . . . . . . . . . . . . 15

Interrupted health services
. . . . . . . . . . . . . . . 17

Interrupted educational institutions
. . . . . . . . . . . . . . . 18

Conclusion and recommendation
1. Summary
. . . . . . . . . . . . . . . 20

2. Recommendations
. . . . . . . . . . . . . . . 20

REFERENCES
. . . . . . . . . . . . . . . . . . . . 22

...............

Introduction
3

1. Executive description of the GoI and MoO: Iraq has an elected government of 32 ministries since May 2006 and these ministries are classified (according to PM Nouri Al-Maliki) into many categories like security, services, economy, foreign affairs, etc. In their seeking to distribute power among all, political parties who formed the government made agreement to ration ministries' portfolios among themselvesI. Forming a new government by this method insured that many ministries have been held by insufficient ministers which became obvious after two years of bad performance in the different sectors of the GoI especially public services sector. In Iraq, the government monopolizes this service, which means that private sector is not allowed to produce and import light (refined) fuel types. Through its enterprises, the MoO's produce, import, export, and distribute different types of light fuel like gasoline, kerosene, diesel, LPG (Liquid Purified Gas – for cooking & heating, etc.) II Iraqi governmental entities, like every organization and personal in Iraq, depend on two sources to meet their needs for power. The first is the power produced and delivered by the Ministry of Electricity through the national grid, which has witnessed a severe shortage through the last two decades. The second is the locally installed diesel generators where people and organization buy and install their own generators inside their own properties and operate them to produce power. The second
I

Wikipedia website and official announcement through local media reports Although private sector was recently allowed to participate in distributing activities, its role still too small to be considered.
II

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source required a continuous supply of some certain fuel types (diesel or gasoline). 2. Brief description of the fuel supply shortfall, its causes, and its effects. Before I describe the problem of fuel supply shortfall, I think it is important to mention that the service of fuel supply has very low demand elasticity because people badly need it for transport, heating, cooking; moreover, many public service providers need it to generate other public services like power plants, water and sewage systems, health facilities, educational institutions. In the same time, and because it is related to the provision of almost all public services, fuel supply service has many positive externalities. Therefore, fuel supply shortfall causes a long list of negative effects. The MoO has four major refineries (Daura, Beiji-1, Beiji-2, and Basrah) and several minor "topping" plants with total designed capacity of 597 500 bb/d III. These refineries have been working within the range (25 – 75)% of their designed capacity for many years now because of many reasons like power supply shortage, corruption, terrorists' sabotage, aging equipments, and the lack of feedstock IV. Therefore, the MoO's refineries have been producing about 300 000 bb/d recently. On the other hand, estimated national demand for refined fuels used to be much over that produced amounts. For 2005, local demand averaged around an equivalent amount to 570 000 bb/d of crude oil which meant that the MoO production's shortfall was about 50% of the neede amounts V. To cover this shortfall and meet that demand, the GoI allocated $5 billion from its budget of the fiscal year 2005-06 to import refined oil products from some neighboring countries (Iran, Kuwait, and Turkey)VI. When the same government submitted its budget for the fiscal year 2006-07 to the Iraqi assembly of representatives for approval, this assembly rejected fuel importing allocation because they though it was a huge load on the national budget and also because of the corruption that wasted major parts of it – according to the spokesman of the assembly. The outcome of that situation was even worst shortfall in refined fuel supply in Iraq. Given that every public and private organization and every person in Iraq depend on both the national grid and their own generators to meet their need for power, refined fuel shortfall has affected all the sectors of the life in Iraq, especially in the capital city "Baghdad." The power rationing of the national power
III IV V VI

Oil & Gas Journal U.S. Energy Information Administration – Country Analysis Brief of Iraq Dr. Ali Al-Alak the former General Inspector of the MoO Jan.05 – May 06 Local media reports

5

grid in Baghdad used to average between (8 hours on – 16 hours off) and 6 (hours on – 18 hours off) VII. Thus, people have to operate their own generators for 8 to 10 hours per day at least, and to do so, they need substantial amounts of fuel. Many public organizations can't afford to buy fuel from the black market as the MoO doesn't provide them with sufficient amounts; therefore, they decrease their working hours which affects the services they are providing. Another bad effect of that shortfall is that transportation became so expensive that many small and medium businesses were forced to close which negatively affected the general economical situation in Iraq. In short, this fuel supply shortfall has many negative effects on the Iraqi scene today especially in the public services and the economical growth of the country as we will see in section allocated for the effects.

VII

USG - Energy Information Administration – Country Analysis Brief of Iraq

6

Causes behind fuel supply shortfall in Iraq

1. Governmental malfunctioning
"The absence of a real governmental central plan to integrate the work of all ministries." During the period I had spent in the office of the DPM Dr. Salam Al-Zoba'i as an advisor for power affairs (March – October 2007), I found that the GoI had no central plan to integrate plans of all ministries together. Such plan was necessary to emphasize the national priorities, to avoid conflicts and mismatching between different projects, and to achieve many desired goals that would make any government to adopt a central national plan. For instance, during the execution of its investments plan for the year 2007, the municipality of Baghdad had to stop and redesign many of its projects because an already existent electric underground nets and some allocated locations for the ministry of transportation's project. Another example was a power plant 7

extension that cost the MoE millions of dollars. By the time those new generating unites (of the extension) had been ready to operate, they discovered that the MoO wasn't able to provide the required amounts of fuel and the Iraqi constitution does not allow any ministry, rather than the MoO, to import fuel to cover its need. The result was very expensive idle generating units in one of the most important power plant in Baghdad. Why such a mismatch happened? Because there wasn't any governmental procedure that makes ministries check with each other to integrate their efforts. There are many other examples that show the bad management of the GoI. Some of the inevitable results, beside many others, were an electric power supply shortfall, a very bad municipality services, an inclined security situation, and a refined fuel supply shortfall.

2. Governmental monopoly
The overall governmental monopoly is an inherited situation from the previous socialist regime. However, present and future governments of Iraq shouldn't keep it this way because private sector can play even greater role than the one that governments would play in some case. In some other cases, a partnership between the government and the private sector would be the curing solution. Until today, there are no serious attempts by the succeeding GoI's to promote the private sector to play that desired role in fuel supply. If we consider; therefore, the demand and supply rules, we will find that preventing the private sector from interring that market means reducing the supply which means prices should rise because fuel supply has a very low demand elasticity. If, hypothetically, prices are not a problem, the shortfall itself still a hard problem because, in Iraq, there are no substitutions for the fuel to get efficient transportation, heating, and power generating.

3. Corruption
"And religious militias' control for making money" Corruption that participated in creating fuel supply shortfall appeared in many forms VIII. One of them was the corrupted MoO's officials who were responsible for the main depositaries of fuel. They used to receive bribes from trucking companies for providing them with forged papers to certify that they had delivered the supposed amounts of fuel while the real delivered
VIII

The annual report of the Inspector General of the MoO, Ali Al-Alak – May 06.

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amounts were less than the half. According to Al-Alak's report, more than 30% of the imported gasoline in the year 2005 was smuggled to be re-soled again out of Iraq. Many Iraqi and American officials reported that this process is continuing until today. There are many other different types and forms of corruption, yet all of them have one common thing – that is all of them are related to and under the control of the religious militias. The corrupted officials operate their business under the protection of those militias for major parts of the income. Although no one can address political parties and their militias' intervention in that business, every one know how they shared the amounts of oil products that daily taken from Basrah's depositories and how each of them has taken over one of the exporting ports on Shat Al-Arab to smuggle its own share. Corruption in oil industry in Iraq has reduced the amounts of refined fuel actually delivered to the people, which participates in creating fuel supply shortfall. Moreover, using the power of their parties, corrupted involved politics convinced the government to underestimate the real size of corrupted sector and its negative effects. In fact, the role of the corrupted officials was is big that only few people in the government are interested in solving out this problemIX.

4. Unstable security situation
"And terrorists' sabotages that affect fuel transportation" Many times during the period October 2005 - October 07, the Southern State Company of Refineries announced through local media channels that it had amounts of different fuel types in its depositaries but no trucking company was able to carry them to the northern provinces, especially Baghdad, because the continuous attacks of the terrorists. Another example was that the Northern State Company of Refineries had to stop its refining process for a long time during 2007 () because tracking companies that used to transport one of the products (heavy black fuel) out of the site depositories couldn't continue accomplishing this jobX. That product accumulated in the depositories and entirely filled them. The whole process had to stop which meant stopping all fuel types' production because they didn't have any more space to store that product. The scene of the effects of the unstable security situation would be completed if we imagine that since August 2005 until now there were more than 20 destroyed main transporting fuel pipelines. Those pipelines were supposed to be carrying LPG, gasoline, kerosene, and diesel from refineries from to Baghdad; and crude
IX X

The same previous source. The spokesperson of the MoO, July 2007.

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oil, heavy black fuel, and residual fuel between refineries and oil wellsXI.

5. Shortage of power supply to the refineries:
Refineries, like any other industries, need electricity to operate. The national power supply shortage, thus, extremely affects refineries' operation although the Ministry of Electricity keeps claiming that it gives the highest priority, in providing electricity, to the oil sector. Iraqis used to witness a decline in fuel supply directly after any overall shutdown in the national power grid. They also used to see both ministers of oil and electricity accusing each other of malfunctioning and incorporation. Power shortage stands, from a technical perspective, as cause and result of fuel supply shortage in the same time. However,

XI

Reports of Energy Fusion Cell-GRD, Corp. Engineers. US Army

10

Effects of this shortfall

11

It is easy to imagine the effects of fuel supply shortfall on any economy in the world, but those effects in Iraq are harder and larger than in any other country because fuel in Iraq stands as a substitute for electricity beside being used, as in other countries, for heating, manufacturing, and transportation. Officials from the Iraqi Ministry of Trade have estimated that Iraq has imported 20 million generators in different sizes for the private market since the year 1991XII, and that the sizes of those private generators ranged from 1 KW to 2 MW, which created a huge demand on refined fuel types. Nobody in Iraq denies that this shortfall does have negative effects, but no one, not even the government, has an idea about the real size of this problem. In this section, I will present and analyze data from the statistics of the Central Bank of Iraq, reports of the Ministry of Electricity, IRMO-US Embassy in Baghdad, and some official announcements of other ministries to prove the negative effects of refined fuel shortfall on many sectors of Iraqis’ lives.XIII

1. Fuel supply shortfall's effects on the economic

activities and financial situations of householders in Iraq
The Iraqi economy has been witnessing crisis after crisis since 1980 - wars, illogical governmental policies, fluctuated oil prices, terrorism and security situations, migration of millions, and power shortage. Any of those can stand as a cause and as an effect in the same time. It is a cause-effects chain; therefore, it is difficult to distinguish the negative effects of fuel supply shortfall separately. However, there are many direct and circumstantial evidences to connect this shortfall to some economic failure in Iraq. • Expensive transportation that affects trading activities

Transportation is a very important ring in the trading "chain". Once this part is affected, the whole chain will be affected; therefore, all economical organizations in the world consider transportation as a sensitive indicator for trade prosperity. Local media reports IRMO is the formal Iraq Reconstruction & Monitoring Office- US Embassy in Baghdad. Now, it has become ITAO, Iraq Transition Administration Office.
XII XIII

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Trading transportation in Iraq depend a great deal on a specific type of fuel – Diesel or what is called gas oil fuel, and to a smaller extent on Benzene or what is called Gasoline fuel. As described in many other places in this paper, when the succeeding governments of Iraq failed to provide the required amounts of fuel, especially Diesel and Benzene, they had created a new black market where people could go and get the much they need in prices as many times as the official ones. Moreover, the present GoI has raised the official prices of all types of refined fuel to cut down some of fuel smuggling incentives (according to the governmental announcements.) Eventually, many trading and transportation companies were forced to freeze their activities or declare their bankrupt because people couldn't afford the additional costs due to fuel prices increase. For example, The Iraqi – Jordanian for Land Transportation Co. has declared its bankrupt in April 20th 2008 after four years of struggling because of fuel supply shortfall, decreased trading activities between Iraq and Jordan, and the security situation in general. • Increasing manufacturing costs and low productivity of most private and public industrial enterprises

More than any other sector of the Iraqi economy, manufacturing and industrial sectors have been severely affected by fuel supply shortage. One of the negative effects was the increasing manufacturing costs that overloaded prices of all Iraqi products. Fewer costumers, today, can afford buying those products than before. Price indexes of foodstuffs, furniture, and miscellaneous commodities have dramatically increased through the period 2004 – 08XIV. Some products, like fabrics and clothing, became more expensive than similar imported products in a very weird situation that pushed many factories to shut down. In Tuesday Dec. 11th 2007, the Iraqi Union of Industries held a media conference and announced that %70 of the 36 thousands Iraqi private industrial projects have been shut down due to fuel supply shortfall, security, power shortage, and the lack for the elementary material that government enterprises used to provide like raw metals, some special chemicals, electronic components, etcXV. It was stated in that conference that fuel types are necessary for industrial projects to produce power for factories (when there is no power in the national grid), feed boilers to produce steam, and be used in some other chemical processes. One of their suggestions for the GoI to rehabilitate private
XIV

Reports of the Central Bank of Iraq for the years 2005, 06, and 07. Local and international Medias.

XV

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sector's participation in the Iraqi economy was to allocate substantial amounts of different types of fuel for those projects. Although the present GoI usually denies what ever refers to its failure, its official statistics, in Table – 1, show a slight part of the sad truth which is the increasing dependence on oil revenues. The complete truth, according many other official and nongovernmental organizations, is that the Iraqi economy is completely depending (% 90 – 100) on oil revenues and international aids and that manufacturing and industrial activities' participation in the GDP has shrunk to less than 5%.XVI Table - 1XVII
2002 GDP ($ million) % From oil sector % From other sectors 40344.9 55.6 44.4 2003 26990.2 2004 37500 63 37 2005 42194.2 63.9 36.1 2006 52948.3 64.1 35.9 2007 79750 66.7 33.3

Similarly, most of the public manufacturing and industrial enterprises that belong to the Ministry of Industries are idle for many reasons and fuel supply shortfall is one of them. According to the official website of the Iraqi Ministry of Industries, only 33 out of its 58 industrial state enterprises are working, and the ones who are working operate within 30 to 80 percent of their capacities. • Fuel black market that offers nonproductive jobs for thousands of Iraqis

Since the day fuel supply shortfall had been created, car lines in fuel stations in Iraq became huge. In crisis times, people had to wait for 24 hours before they got their vehicles' tanks filled XVIII . Moreover, there were harder crises when fuel stations had to close because they didn't have any fuel to distribute. Many people couldn't wait too long, so they were ready to buy the time by paying extra money which provided a good incentive to create refined fuel black market. That business has been offering nonproductive jobs for thousands of Iraqis. Inevitably, as those people were making good money from dealing refined fuel types, they didn't have to consider other jobs that might produce public values and
XVI

Beside 5 – 8 % for other economic activities like agriculture, construction, power generating, services, transportation & distributing XVII Reports of the Central Bank of Iraq for the years 2005, 06, and 07. XVIII Personal observation experiment.

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services. On the other hand, Baghdad municipality, the Ministry of Transportation, and many other public service providers were suffering from labor shortage. People who work in fuel black market and other black markets are not registered as employed working force because there are no records for such businesses. Therefore, calculation and data of unemployment and income per capita levels that should be done by the government become more complicated and ambiguous. Such a situation add extra confusion to the planning of the already confused GoI.

Householders' financial balances

While the national average income per capita per year hasn't changed that much since 2003 – when this problem has started, the price indexXIX of the refined fuel types has increased by more than %3500 since that time XX. The prices of most goods and services have increased as a normal result of the continuing inflation; however, all of those increases were, for some extent, relatively acceptable as there always was an increase in the average income per capita. But what income increase can cover that explosion in fuel prices? I have took the year 2003 as a reference point and put the increase percentages of price indexes of refined fuel and food for the period 2003-2007 along with the increase percentages of average income per capita per year on one plot (Figure -1). It's obvious from that figure that refined fuels' prices explosion has cost the Iraqi householders a lot of their buying abilities which has been reflected on their expenditure in other fields like education and health (as we will see in coming parts of this section.) The food index here is just a sample for indexes of other human needs like transportation, house Renting, various service, clothing, smoking, and alcohol whose indexes behaved very much similar to the food index. The reports of the Central Bank of Iraq suggested that these increases of fuel price index were mainly caused by the continuous supply shortfall that made householders go to the black market and raise the demand as well as prices. The GoI has stopped
XIX

Prices index : A measuring scale used to indicate householders' various expenditures in points instead of real currencies. XX "The Annual Reports of the Economical Indicator of Iraq” The Central Bank of Iraq - the General Directorate for Statistics and Researches

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subsidizing fuel supply and increased the formal fuel prices to about %70 of its old prices to destroy smugglers incentives in the first place; nevertheless, the major part of this price explosion was caused by the supply shortfall not by the governmental reformed policy towards subsidies. The inevitable result of this situation is an exhausted householder's financial balance, overloaded with the heavy expenses of fuel types for heating, cooking, and transporting. In other words, the remaining part of householder's balance, after dedicating major parts for fuel, can't cover other expenses mentioned before. Incoom F Prices and F e, uel , ood pricesincreas percentag e e

4000 3500 Inc s P enta e rea e erc g 3000 2500 2000 1500 1000 500 0 2002 2003 2004 2005 2006 2007 2008 Increas percentage of incom e/capita/year Increase percentage of fuel prices index Increase percentage of food prices index

Figure - 1

2. Fuel supply shortfall's effects on public services
Although fuel supply shortage has affected almost all the sectors of the public services, I have chosen only three sectors – power supply, health, and education services because these sectors have been the most affected ones. • Power plant low productivity

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Electric power supply is one of the most important public services; therefore, any government in the modern world has to make sure that its citizens are enjoying sufficient amounts of this service. In a country of such extreme weather like IraqXXI, electricity becomes even more essential; the different GoI's; however, have failed to sufficiently provide this service. One of the main reasons behind the low productivity of the MoE's power plants is the shortfall of fuel supply that these power plants need to produce electricity XXII. I have joined some power data from the reports of IRMO into multi-shaped chart (Figure 2) to show to what extent fuel shortage has participated in creating power shortage. The gray bars represent the average supply each month which, obviously, are a way below the rigid blue line which represents the estimated average demands. The colored continuation bars represent why power supply is always below demands for that period. Substantial parts of that colored continuation bars refer to the power shortage due to fuel supply shortage. The same data is available in table form below for those who find chart form is difficult to understand. Figure - 2
power measures in Iraq for one year
10000 9000 8000 7000 MW.hr 6000 5000 4000 3000 2000 1000 0
6 . Ja De n. c. 20 07 F eb M . ar ch A pr . M ay Ju ne Ju ly A ug . ct . 20 0 O N ov
Actual (designed disrepaired) capacities 7868 7115 6500 6912 6720 6879 6650 7880 7110 8950 8453 8945 off due to planned & unplanned maintenance

off due to fuel shortage
off due to w ater shortage in dams

41204000 3950 4100 4040 3850

3800 3530 3640 3705 3756 3800

Av erage Supply

Estimate d de mand av erage

S ep

t.

Table - 2
Iraq weather: dry and very hot (55 ͦ C, 131 ͦ F) in summer ; rainy and very cooled (- 10 ͦ C, 14 ͦ F) in winter XXII Dr. Karim Wahid the Minister of Electricity in many announcements since 2006
XXI

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MW.houre
Estimated demand average Actual (designed disrepaired) capacities Average Supply off due to water shortage in dams off due to fuel shortage off due to planned & unplanned maintenance

Sept . 200 6 7 868

Oct.

Nov.

Dec.

Jan. 200 7 6 912

Feb.

March

Apr.

May

June

July

Aug.

7 115

6 500

6 720

6879

6650

7110

7880

8453

8950

8945

9 020 4 120 2 020

9 020 4 000 2 100

9 020 3 950 2 153

9 020 4 100 2 046

9 260 4 040 2 101

9260

9260

9260

9260

9460

9460

9460

3850

3800

3530

3640

3705

3756

3800

2108

2078

2069

1887

2142

2203

2220

680

685

680

700

665

658

688

705

720

720

680

650

2 200

2 235

2 237

2 174

2 454

2644

2694

2956

3013

2893

2821

2790

Interrupted health services

As described earlier in the introduction of this paper, public and private health service facilities have completely depended, since the year 1992, on two power sources – the national grid and their own generators. Before April 2003, this situation wasn't a problem because fuel was available and cheap, so those health facilities – hospitals, clinks, mortuaries, etc – were able to continue serving people even when there was no power in the national grid. A while after April 2003, those facilities couldn’t work properly due to power severe shortage; no power in the national grid and no fuel to operate local generators. Every one in Iraq has noticed the sharp reduction in health services quality since then, and many Iraqi health officials have thrown part of the responsibility of that reduction on the low availability of power and fuel.XXIII Iraq used to occupy a leading position in the UN - WHO's ranking lists of health services of Middle East countriesXXIV. Whereas this was before 2003, today Iraq holds a retarded position in those lists because most of its public and private hospitals can't provide even the minimum required services, not even for emergency cases, after 05:00 PM because they save the scarce amount of fuel they get to operate their own generators during the day when their services are most required. Many local and international media reports. "Health in Iraq" , A report by Dr. Ala'Din Alwan - the former minister of health in Iraq.
XXIII XXIV

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Many other fuel supply-related malfunctions pulled Iraq's position down in those lists. Some of them were: Mortuary's freezers low reliability. Without power or fuel, those places have become merely warm storing places for bodies of diseased people where they become biodegradable after few hours from being there. Potable water and sewage systems low reliability. Governmental failure in this field, particularly, is considered to be the most dangerous symptom of the phenomenon of fuel supply shortfall. According the GoI, pumping stations of those systems are designed to operate on the power of diesel generators when there is no power in the national grid, which is the case almost all the time. Both terrorists' sabotage that destroyed power nets that connect pumping stations and fuel supply shortfall have caused water and sewage systems to fail. Potable water doesn't reach many places in the capital city, Baghdad while it reaches other places with a very low pressure. Many times, during the period 2005 – 08, the Ministry of Health asked the people to boil the water provided through the national water system before use it for drinking and cooking because it wasn’t sufficiently treated before pumping. Many times during the same period, WHO's representative office in Iraq declared the possibility of Cholera wide infection because the low quality of potable water provided through the national water system. First Aid and Ambulance services low reliability. First aiders have used to charge people a lot of money for the fuel that they consumed to get to them in their places. If the family of the person who needs a medical treatment can't afford that amount of money, it is very difficult for them to get a first aid and an ambulance to get the patient person to hospital.

-

-

Interrupted educational institutions

Although it is difficult to distinguish between the effects of fuel supply shortfall and those of other negative factors, many officials, from both Iraqi Ministries of Education and Higher Education stated that education services had been severely affected by fuel supply shortfall. Indoor conditions of the educational institution in Iraq are very difficult without power, which affect both students and instructors' performance; most of computer and experiment laboratories are idle which extremely reduces students' chances to get useful knowledge.

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Conclusion
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1. Summery
Refined fuel supply shortfall is on of the main characteristics of the "after 2003" era. There were many factors behind creating this phenomenon - governmental monopoly, the lack for governmental central plan, corruption, terrorism, and power shortage. This phenomenon gives observers and interested people of governments performance an important lessons about the danger and importance of the following concepts: A. The proper balance between centralization and decentralization. Extreme approach toward one of them would create either dictatorship, or governmental malfunction and ineffective performance. B. Corrupted officials covered and protected by governing political parties. No political party in the world would accept to accuse one of its members of corruption unless they want to get rid of him for other reasons, and it did not happen in Iraq. Therefore, monitoring system controlled by independent

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officials is an essential tool for any government to accomplish its mandates towards its citizens. C. Private sector participation. For governments, It's just like letting someone do their jobs for some income. Moreover, private sector performance is better than governments' performance in many fields. D. The destructive disease, the "Terrorism." Terrorists follow a very dangerous rule – nothing is forbidden until they reach their goals. They would kill, destroy, and sabotage anything and anyone in order to get what they want. In Iraq, fuel supply shortfall has severely affected every day details of the people lives; it has affected their financial situations, the way they used to get things done, their health and education services, etc.

2. Recommendations
• Allow private sector to inter refined fuel market in Iraq as producers, importers, and distributors. This would create competition that might drive providers to provide all the needed amounts of fuel types and in the best available prices. This would also give the GoI the space for efficient dealing with this problem. Installing power plants inside refineries' locations to produce and exclusively provide them with power. This would raise local production of refined fuel types a great deal. Creating special protection contracts with the Arabian tribes to protect oil pipelines within their lands and zones of control from being sabotaged by terrorists. Such contracts have been experienced by a former Iraqi Government to protect high voltage towers and it efficiently worked. Re-functioning the previous "Ministerial Power Committee" and authorizing it to create and implement integrating plans and strategies and enforce them against ministries' resistance. Because corruption is so pervasive in the GoI, it is recommended to refer this issue to the "Iraqi Intelligence Services" to avoid the intervention of political parties. Until 22

today, this governmental department is independent from political parties which gives it the required reliability to deal with powerful corrupted people.

References
1. The Central Bank of Iraq / the Annual economic reports 2002 07. 2. USG - Energy Information Administration – Country Analysis Brief of Iraq. 3. US Embassy in Baghdad – IRMO daily reports (IRMO : Iraq Reconstruction Management Office). 4. Local and international media reports. 5. Personal observation. 6. “Health in Iraq” , an official report by Dr. Ala'Din Alwan – the Minister of 23

Health 2005-06. 7. The Iraqi Ministry of Planning and Developing Cooperation – C.S.O. 8. official announcements. 9. The annual report of the Inspector General of the MoO, Ali AlAlak – May 06. 10.Oil & Gas Journal – An international specialist journal. 11.Energy Fusion Cell-GRD, Corp. Engineers. US Army

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