No Blood of Oil? A Lesson in Math�.

I was walking down Lexington Avenue in New York City yesterday, when I noticed a young woman with impossibly red hair sporting a button on her backpack that read: �No Blood for Oil�.

Apparently, my message hasn�t gotten out.

This war isn�t about Oil. I�ll even go so far as to concede that the first was certainly about Oil. If anything, this is a war to protect banks and insurance companies, but more on that later. Sure, some defense contractors will get a pop, but that was going to happen anyway.

No, this piece is written for those Who Still Don�t Get It (WSDGIs). So, for those who don�t believe, let me do the math for you.

The Math, Part 1

Saddam Hussien�s Iraq produces 2.5 million barrels of oil a day under the UN�s Oil for Food program. At $30 a barrel, that runs to about $75 billion or what President Bush has asked to fight this war if it only goes 30 days. If it goes longer � my guess is six weeks � then he�s going to need more cash. Assuming we confiscate the entire output, the US would need to pump for a year to pay for this. And this assumes two things: a) output doesn�t increase (it will, to pre-sanction levels of 4 million barrels per day), b) the price of oil stays at $30 a barrel (it won�t since volume will increase). If this conflict goes long � and bet that it will � you�re looking at several years production to pay for this adventure.

But we're not going to confiscate Iraq's entire oil output. No, we're just going to pay for it, like everyone else. Energy prices will dip, but only to where they were before Venezuela started cracking up. Unleaded at $1.20 a gallon is not why Mr. Bush jumped into this with both feet.

As capitalist and an entrepreneur, the risk is too long and payoff is to short. And the above assumptions are based on our confiscation of Iraq�s oil, something that no rational person believes will happen. No, like I said, we�ll buy it like everybody else, which negates the whole reason for going, if the reason is oil.

The Math, Part 2

No, if there is a beneficiary, it�s the banks and insurance companies invested in Manhattan real estate.

What? We�re attack Iraq to protect Manhattan real estate values? Yeah, if you're must have some nafarious conspriacy that stipulates that the only reason for a war is that some business somewhere must benefit, these are the ones.

Back in 2001, some terrorist mailed envelopes with weaponized anthrax to Sen. Tom Daschle. The cost to decontaminate the Hart office building was $42 million. Imagine now, if a pair of crazies toss a baby food jar of the same stuff in front of the Number 1 train on west side of Manhattan, and in front of the Number 4 train on the east side. The subways in New York vent to the sidewalk, so toxins would be distributed all over the city.

Thousands � maybe even millions � of people die. A lot of those people would have life insurance claims that would have to be pay off. If 50,000 people have $125K worth of insurance each, you�re talking about a $6 billion hit to the insurance industry. Sure, that�s big and scary enough, if you�re an actuary or a insurance exec. But that�s not the really scary part.

Commercial structures in Manhattan would be rendered uninhabitable and those business contained therein would be forced to flee. Rents would stop being paid. All those glorious skyscrapers could be standing empty.

In Manhattan, there is 353 million square feet of office space. At an average price of $35 per square foot (a very low estimate), that equates to $148 billion (with �B�) in rents. Now imagine all that space empty and needing de-contamination. The economic fallout would be cataclysmic. The note holders on those buildings � banks, REITs, insurance companies � would be left holding the bag and would no doubt default.

Now, if the Hart Senate Office Building cost $42 million to decontaminate, and it contains roughly 1 million square feet, how much will it cost to decontaminate Manhattan�s office space? If the same rates hold, the amount needed to pay for this is $14.8 billion (that�s with a �B�). Add that together with the several years worth of lost rents and you're talking about a hit to the economy that would make Sept 11 look like a speed bump.

And that�s just Manhattan commercial space. What about the residential hit? How long would those $8 million townhouses be worth $8 million dollars in a city as uninhabitable as Chernobyl? Factor in lost economic activity and you're talking about a 1 or 2 trillion (with a "T") dollar hit.

Look, I�m not one to second-guess the President�s motives. If he says this conflict is to liberate Iraq, get rid of Saddam and cleanse the country of WMDs, then so be it.

But don�t say it�s about Blood for Oil, because it�s not. That empty-headed manifestation of free speech used by those WSDGI is more than just wrong; it�s stupid and an insult to the intelligence of those of us who have done the math.

28 Mar 03 dpny