X-URL: http://straitstimes.asia1.com.sg/analysis/cpe4_0927.html
SEP 27, 2000
US' weakness in the face of Opec
By ROBERT KUTTNER
WASHINGTON POST
THE record economic boom is near a tipping point. Although no serious
inflation is being generated by the sizzling economy, increases in oil
prices show up in the general price index. They also worsen America's
balance of trade.
Meanwhile, the weakness of the euro is depressing profits that
American companies earn abroad. On all these counts, the stock market
is getting very nervous.
A big stock-market correction would cool both consumer and business
spending. It might scare off the foreign investors who keep buying our
bonds. In this context, a mis-step by the inflation-phobic Federal
Reserve could help send the economy into recession.
Vice-President Al Gore must be praying that the economy holds up until
Nov 7. His friend and mentor, President Bill Clinton, must be using
every diplomatic lever to pressure Opec to open the spigots. Our
European allies, faced with consumer revolts over the price of petrol,
are doing likewise.
The weakness of the West in the face of Opec is puzzling, just as it
was during the first oil shock of 1973.
Although the oil-producing nations include some nasty rogue states,
among them Iraq and Libya, they also include countries that owe the
West big-time, notably Saudi Arabia, Kuwait and Mexico. Where are our
oily friends when we need them?
The two presidential candidates are already playing the blame game. Mr
George W. Bush blames the Clinton administration's lack of an energy
policy, though he hasn't proposed one of his own. Mr Gore, in turn,
blames the oil companies (which just happen to be close allies of both
Mr Bush and Mr Dick Cheney).
Neither stance is entirely fair. The oil companies are happy to profit
from tighter oil supply, but they are not the main cause of the
current price spike.
The Clinton administration has basically had the same energy policy
that Republicans commend -- trust the markets to set prices.
The fault is bipartisan. For one thing, US foreign policy has been so
focused on military and terrorist threats that the geo-economics of
oil have not received adequate attention.
The more fundamental problem does not lie with Opec, but is one that
environmentalists have been warning about for decades: America's
excessive dependence on imported carbon-based fuels. But that concern
fell from general favour as soon as oil prices eased in the 1990s.
Economists snickered at the idea that any reasonable person could
think that oil could stay at US$35 (S$61) a barrel; cartels never
lasted long.
And, sure enough, the price of oil came back down to below US$12 a
barrel, petrol at the pump dropped below a dollar a gallon, and
Americans resumed their love affair with petrol-guzzling cars.
But the West's increasing appetite for oil and our failure to get
serious about conservation and alternative energy sources soon shifted
the bargaining power back to Opec. And oil is again at US$35 a barrel.
America is the worst offender. Japan is well ahead of the United
States in developing ultra-efficient hybrid-engine cars.
Americans continue to use carbon fuels at double the rates of European
nations with comparable living standards. Our airports are a congested
mess, while plans for high-speed inter-city rail corridors languish
and Republican legislators threaten to put Amtrak out of business
entirely.
Mr Gore can perhaps be faulted for using the Strategic Petroleum
Reserve as an election-year energy policy.
But, in truth, he has shown more gumption on this subject than most
American politicians. He pressed hard for a technology partnership to
develop cleaner, fuel-efficient engines. He once proposed a modest
increase in the tax on petrol, and has been pilloried ever since.
For the long term, higher taxes to discourage petrol consumption,
coupled with much more efficient cars and other forms of
transportation, are just what is needed.
But no politician can propose higher petrol taxes at a time when
consumers are already reeling from price shocks at the pump. An
oil-fired economic burnout could reverse Mr Gore's lead quickly.
How ironic that if the country had listened to environmentalist Gore a
decade ago, candidate Gore might not be biting his nails today.
----- End of forwarded message from John A MacDougall -----