The economic impact of the United States led war in Iraq are many and varied. With the apparent success of the United States led coalition in Iraq, the economic consequences of the war will be a lot less severe than many analysts had predicted before the war started. The cost of the war is divided into two areas; direct costs and indirect costs. The direct costs will be the cost the U.
S. government bears directly for the war effort. This costs include the cost of sending the over 200, 000 military personnel to the Persian Gulf, the cost of sending military equipment and supplies, fuel costs, maintenance costs, personnel combat pay and the cost of payments to host governments where U. S. forces are located.
In addition to the above costs, the U. S. also faces costs for humanitarian aid for the people of Iraq, aid to neighboring countries adjacent to Iraq such as Turkey and Jordan and also the cost of rebuilding the infrastructure in Iraq once the war is over. All of the above costs are the direct costs bore by the government of the United States for Operation Iraqi Freedom. The estimate of the direct costs of the war in Iraq are approximately $47 billion, and up to an additional $100 billion for humanitarian aid and the reconstruction of Iraq. The indirect costs of the war in Iraq are costs bore by businesses and consumers for increased energy costs, and also the costs to the U.
S. economy due to the war effort. It has been estimated that since the crisis that led up to the war began, energy costs for gasoline, jet fuel, and natural gas has rose by more that 40%. This has resulted in an additional $20 billion in energy expenditures bore by U. S. businesses and consumers.
The cost to the U. S. economy has not been precisely estimated. But the war is believed to cost U. S.
businesses billions. Many industries have been affected, industries such as the airline industry has lost billions because of reduced travel, which has led to some airlines to file for bankruptcy protection. Retailers are recording a reduction in sales, because of reluctance by consumers to spend money, and businesses are also reducing their capital expenditures because of the uncertainty of the war's impact to the economy. However, the success of U. S. led coalition, may buoy consumer confidence and increased spending by the U.
S. government will have some short-term benefits to the economy. Also, oil prices are expected to fall, reducing energy costs to businesses and consumers. If Iraq is successfully liberated and a stable government is installed, Iraq will be able to greatly increase their oil production, which will lead to a fall in oil prices worldwide. If oil prices falls to $24 a barrel or less, for a long period of time, this will save U. S.
businesses and consumers up to $40 billion a year. These savings, if sustainable can mitigate the initial costs of the war.