Gasoline price controls in Iraq are responsible for retail gasoline shortages and a withering decline in refining capacity.
BAGHDAD, Iraq (Reuters) — The country with the world's third largest oil reserves should not run out of fuel.
But Iraq has come perilously close to doing just that. To save fuel, and to general confusion, the government has ordered half the capital's car fleet off the roads on any given day.
Tuesday was the first day of the new rule, and only cars with licence plates ending in an odd number could take to the streets.
Widespread gasoline shortages have led to rationing. This is the predictable effect of price controls. Price controls prevent markets from clearing, creating shortages or gluts. The gasoline price caps in Iraq have created shortages because when a product is nearly free, people will attempt to buy more of it.
[The rationing] owes to years of under-investment in Iraq's creaking oil refining and distribution sectors, which have left the 2.5 million barrel per day producer unable to meet its domestic demand for gasoline and other essential oil products.
I haven't been following Iraqi politics too closely, but the only explanation I could come up with is that Shiites, Sunnis, and Kurds compromised by electing a born-again Christian from Georgia to be their leader.