Soaring Gas Prices Jar Cash-Strapped Iraqis

BAGHDAD, Jan. 7, 2006 — -- Adbul Al-Rahman waits in line an entire day to fill his taxi cab with gasoline. Gas shortages and escalating prices are causing many Iraqis to flock to gas stations in droves.

Spending so much time in line means Rahman is unable to work every day. He cannot raise his taxi fare to compensate for lost work days since many Iraqis are poor and cannot afford higher rates. Since gas prices skyrocketed, his income has been cut in half.

Rahman, like many other Iraqis, is waiting for a solution to Iraq's fuel crisis -- but a fix is not likely to come anytime soon.

Iraqis long have relied on fuel subsidies, but in recent weeks those credits have been drastically cut. Fuel prices have skyrocketed to 65 cents a gallon from 5 cents a gallon last summer. Prices could reach $1 per gallon later this year.

Why Prices Have Escalated

Iraq, deep in debt, negotiated with creditors to restructure much of what it owes. The International Monetary Fund agreed to forgive 80 percent of the debt provided that Iraq cut gas subsidies. Iraq agreed.

Iraq's oil minister, Bahr Al Uloum, protested the government's decision saying, "It is not proper with the economical situation of the people."

Al Uloum added that price increases would further harm living standards. Top wage earners in Iraq make $130 a month. Twenty-five percent live on just $1 a day.

However, when Al Uloum balked at the government's decision to reduce subsidies, Prime Minister Ibrahim Al-Jaafari replaced him. Ahmed Chalabi, the deputy prime minister and a former U.S. ally, assumed direct control of Iraq's powerful oil ministry this week.

The money Iraq saves by cutting subsidies is supposed to be redirected to pay for public services such as health care and education. However, many Iraqis are reluctant to believe that services will improve.

The political decision to cut gas subsidies has outraged many Iraqis.

"I believe they did not think of the consequences," said Ni'Amma, an Iraqi driver who spent much of his day waiting in line at a Baghdad gas station.

Demand for gasoline has soared by half a million gallons a day because of electricity shortages. Residents are loading up on gas, fearing that prices will climb higher. Many homeowners also are stocking up, purchasing extra fuel to run generators that produce electricity.

Gasoline supply has plummeted. The large Dawra refinery in Baghdad has operated at less than half its usual capacity. A major pipeline that fuels the Dawra plant has repeatedly been sabotaged. Drivers who transport gasoline have been threatened by insurgents.

This week a fuel convoy en route to Baghdad was attacked. One tanker was ambushed by attackers using an improvised explosive device. Another was hit with a rocket propelled grenade. Now, the Iraqi army will escort fuel convoys.

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