BloombergHere’s One Place Where Gasoline Prices Are Rising: Islamic State By Zaid Sabah, Caroline Alexander and Jack FairweatherWhen Islamic State seized Mosul in June, the militant group boasted it provided the cheapest fuel in the region as it tried to win over Iraqis to its cause.
Since then, the worldwide price of oil has fallen more than 30 percent. Yet in Iraq’s biggest northern city the cost of a tank of gasoline has more than doubled.
U.S. airstrikes against the extremist group’s oil facilities have severely reduced its ability to generate revenue. At the same time, eyewitnesses say the militants are finding the cost of governing their territory and mounting a war on multiple fronts is rising, straining its once-bulging coffers to finance military operations and pay recruits.
“The situation has changed tremendously for the group in terms of the volumes of crude it’s producing, but most significantly, the volumes of refined products it has,” said Valerie Marcel, an oil analyst specializing in Iraq at Chatham House in London. “That’s what underpins their war machine.”
If the fight against Islamic State has reached impasse on the ground as the group hangs onto swathes of territory in Iraq and Syria, the dearth of fuel is evidence that there’s progress on the economic battlefront.
Previous estimates by U.S. intelligence officials and energy analysts put Islamic State’s oil revenue at more than $2 million a day. Now it would be more like $200,000 in Iraq if the group sold everything it pumped, or about $400,000 if it then refined the oil before selling it, said Marcel.
Syrian Imports A liter of refined crude was going for about 1,750 to 2,000 Iraqi dinars ($1.45 to $1.66) last week in Mosul, northern Iraq’s biggest city, according to locals. It’s mostly sold from oil tankers from Syria and the quality is so bad, it’s damaging car engines and fuel pumps, they said. Before the city fell, the average price was about 400 to 750 dinars a liter and the crude on offer was from Iraq and of better quality.
Residents of Mosul spoke by telephone on condition of anonymity because of concerns about their security in a city where extremists mete out anything from public lashings to beheadings for not obeying their strict Islamic code.
The people said the high prices have made cars unaffordable so they rely on using minibuses to spread the cost. That situation is echoed in Tikrit, where the price of gasoline and kerosene has steadily risen, one local said.
Winter FuelWinter has already hit the mountainous northern Iraqi regions, with snow falling on parts of the Kurdish north. In Mosul, where temperatures can plunge as low as minus 15 degrees Celsius (5 Fahrenheit), residents unable to afford kerosene for heating are collecting wood for open fires.
A 200-liter barrel of Iraqi kerosene used for heating costs about 300,000 dinars. Two weeks ago, one resident said she paid 280,000 for Iraqi kerosene. Before the fall of Mosul, the price of kerosene was 50,000 dinars a barrel.
Islamic State declared a self-styled caliphate in northeastern Syria and northwestern Iraq after seizing Mosul, and has sought to entrench its rule through a combination of brutal repression and provision of social services, including offering reduced prices for gasoline.
In one issue of Dabiq, its magazine published online, the group lists the benefits, including “pumping millions of dollars into services,” security and stability, “ensuring the availability of food products and commodities.”
Smuggler NetworkIslamic State is almost entirely self-financing with much of its past income earned through illicit production, refining and sale of oil. The U.S.-led airstrikes that began in September, though, shut down Islamic State’s main refining capacity. Forces loyal to the Baghdad government also retook oil fields and Kurdish Peshmerga fighters tackled gangs who had been helping Islamic State smuggle oil out of the country.
The militants will have to rely more on ransoms, racketeering and the taxation of people and goods at border crossings, said Marcel. She estimates the group is pumping about 10,000 barrels a day in Iraq. That’s down from a high of about 70,000 barrels a day in August.
“Islamic State was making significant amounts for its budget size with its crude, and was creating a whole constellation of criminals and smugglers benefiting from the trade,” she said. “Those days of them selling at $60 a barrel are long gone. It has fallen back to about $20 a barrel.”
Islamic State consumes about half the oil it controls, Hamza al-Jawheri, an Iraqi economist and oil analyst, said from Baghdad. It’s used mainly to power Humvee military vehicles, tanks and trucks captured in its conquest of Mosul.
Oil FieldsMore fuel-efficient motorcycles are increasingly deployed to make it harder for drone operators and pilots to differentiate them from civilians, a Mosul resident said.
Government forces took control of the 310,000 barrel-a-day Baiji refinery last month after fierce battles. Islamic State controlled the site for about a week in June, along with two other refineries and seven oil fields.
Among fields Islamic State has lost are Ain Zala, Batma and Zumar. They can’t access Ajil and Himreen fields in Salahuddin province because of nearby fighting, said al-Jawheri. That leaves the group with only a few oilfields, such as Qayyara, which produces heavy crude and maybe Qalak near Mosul, which makes a lighter crude, he said by telephone.
Qayyara can produce about 20,000 barrels a day of heavy crude, though makeshift refineries can’t be used to convert that into a usable fuel product, Marcel said.
The Syrian oil Islamic State is now relying on in Iraq comes mostly from the northeastern Hasaka province, Noura Salim, an Iraqi lawmaker from Mosul, said by phone. The fuel is trucked across old, unpaved roads and enters Iraq usually through one of three crossings, she said.
Back in Mosul, some residents have begun using camping stoves for heating, cooking and warming bath water.
One resident said the city was getting close to breaking point. The situation is getting grimmer by the day, people are losing patience and are broken, she said.
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