Our guys killed, Iraq's oil goes to China, Britain

This news today from Wall Street Journal:

BAGHDAD (Dow Jones)--A consortium of BP PLC (BP.LN) and China's CNPC Tuesday won the contract for Rumaila oil field - the largest oil field in Iraq and one of the largest in the world, the Iraqi Oil Minister Hussain al-Shahristani said. The consortium had been seeking $3.99 remuneration for each extra barrel of oil produced but after last-minute negotiations Tuesday morning accepted the Oil Ministry's terms of $2 a barrel. The companies had bid to increase output in Rumaila to 2.8 million barrels a day. The field is currently producing 1.1 million barrels a day and is estimated to have reserves of around 17 billion barrels.
This is the first contract awarded in Iraq's first oil and gas field tender open to international companies in nearly three decades. -By Hassan Hafidh, Dow Jones Newswires

Few of the readers of this blog recall the 100,000 troops from China who assisted the United States in holding down the violence in Iraq during recent years. Readers don't remember because there are no troops to recall, no aid for the cause, but now they reap the profits.

Oddly, the Chinese and British Petroleum (BP) were willing to accept less than a few dollars a barrel in payments, while U.S. oil companies were looking to get in the mid $20s. Sounds like American oil companies were way too greedy in their demands. What were they thinking with such ripoff bids? They must have thought they were bidding for rights in U.S. national parks or offshore.

In reviewing the fact that most bids were refused for oil development today (except BP and China) there is an interesting analysis from the Houston Post, in a town where oil firms are divine:

As much the licensing round's cheerleader and key driver, al-Shahristani has also been its scapegoat. His critics have pointed to Iraq's inability to even reach its prewar production levels as evidence that he has failed in his job. Others gripe that the bidding round will open the door for an economic occupation of the country at a time when it is pulling away from the U.S. military presence that many in Iraq likened to military occupation.
The poor showing could further strengthen critics' arguments that he put too much emphasis on the bidding round while ignoring easy repairs to the sector that could have been carried out over the past couple of years.
The minister, however, has insisted he was working for the country's best interest.
Iraqi officials have estimated that based on crude oil at $50 per barrel, the companies could earn around $16 billion in total. Iraq, meanwhile, would get over $1.7 trillion. As part of the contracts, the companies have to provide so-called "soft-loan" signature bonuses to the government that total about $2.6 billion.
The company response to the bidding sends a clear signal to Iraq, said analysts.
It says "the companies will still be there, but they've made it clear what their baseline is, and that they can't go into the red even to get access to Iraqi oil," said Ciszuk. "The risks are just too great."

Social Security is owed, not an entitlement

Behind the headlines calling for private accounts and trumpeting tax increases and benefits cuts for Social Security recipients, there lurk good intentions, political dogmas, past decisions by committee-think, and grotesque pandering to young and old.

How can this be explained in simplest terms, the media seems to wonder? How can we sell our root philosophy, the politicians ponder? Meanwhile, millions are being spent to "educate" you by calling on your emotions, clouding your reason, and confusing you over what is common sense by turning United States social security benefits and retirement discussion into double-talk and half-truths about voluntary, private accounts, and constant reference to "entitlements," as though decades 0f contributions to Social Security equal some form of welfare..

The stakes are incredible. If you earn just $20,000 a year, starting at 18, with only a 1.5 % inflation salary increase, at age 65 you should accumulate $565,059 at a 3.3% inflation- adjusted interest rate. That's under the current 6.2% contribution plan for workers and 6.2% for employers. Your retiring salary at 65 should be $40,266, and your benefits should be $25,391, slightly more than 60% of current salary - and net of income tax. You and your employer will have contributed $86,261 each to your retirement.

That scenario is what should happen. Unfortunately, past administrations have never established an actual individual fund for anyone. Part of the reason is the original law in the 1930s reflected the accounting reality of the day - millions of hand-entries in the insurance and banking industries, and hundreds of thousands of clerks and accountants tracking money. It would have been a costly nightmare to manage millions of pension accounts, especially voluntary, personal accounts by hand, and so tables were established and payments for personal accounts calculated on a set rate of return.

The following principles are critical to a fair United States Pension Plan:

Set the interest rate for Social Security bonds and payments at 3.3% above the current inflation rate, adjusted quarterly. This reform will guarantee a 60% or higher payment to every retirement recipient at age 65 and it will maintain the solvency of the trust fund and payments to personal accounts..

Raise the limit on contributions to $250,000 of annual wages, instead of the current cap of $90,000. If combined with principle #4 these high-income individuals will receive a commensurate return on their increased payments.

Base recipient payments solely on the amount contributed over their lifetime of work - in short, the sum of their set and voluntary contributions, employer contributions and interest earned. Personal accounts benefits will be based on the same formula - 3.3% above the current inflation rate.

Permit the designation of all individual contributions to be placed in the trust fund of another person or persons. For example, the $86,261 - accumulated by the $20,000 wage earner in our benefits table - could be transferred to the trust fund of a spouse, children, grandchildren or other loved ones. This voluntary allocation of private accounts would enhance their benefits and this estate would be part of their contribution base for future, similar endowments.

Remove all federal, state and local taxes on the payments of benefits to trust fund recipients. This reform for personal accounts is in exchange for sacrificing the interest earned by their contributions over a lifetime, tax free.

Invest the trust fund, not just in United States Treasury notes, but in municipal bonds, which are guaranteed by state or local tax bases. This would eliminate an enormous premium on interest rates, now paid by governments, and end excessive bond counsel and other fees, encouraging new school and road construction, and repairs to the nation's infrastructure.

Allow the voluntary contribution of more than 6.2% by individuals. These voluntary pension private accounts would form part of the base of their retirement benefits. All funds and the interest they earned would be payable in the same manner as an I.R.A. - withdrawn as early as 59 1/2, with mandatory deductions at age 70. These disbursements would be taxable as withdrawn, and loans would be permitted under the current 401K rules.