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In April of last year, Rep. Nancy Pelosi, D-Calif., was asked why gas prices were surging ever closer to $3 per gallon. She told CNN: “We have two oilmen in the White House … The logical follow-up from that is $3-a-gallon gasoline. It is no accident. It is a cause and effect.”
How prescient was her thinking? I’d pick prescient over predictable. Not that the war between congressional Democrats and Bush Republicans over the price of oil is anything new. It’s been going on since President Bush took office. But as oil nears $100 per barrel, as gas exceeds $3 per gallon nationally and as heating oil and natural gas spiral skyward in anticipation of winter, debate is brewing once again over who is at fault.
A smidgen of history is necessary here. Crude was trading at about $25 per barrel the year that George W. Bush was inaugurated.
Within a year, the price actually tumbled to around $17 per barrel. It has done little but climb, climb, climb ever since. The $100 barrel of oil is no longer unimaginable, it’s coming and soon. How much of that is the Bush administration’s fault?
Quite a bit if you listen to Congressional Democrats, none at all if you’re in the Republican camp. Most recently, seven Democratic senators sent a letter to Energy Secretary Samuel Bodman “respectfully requesting” that the administration “immediately” postpone further deliveries to the nation’s Strategic Petroleum Reserve. The Reserve is the world’s largest emergency petroleum store maintained by any government and can hold some 727 million barrels of crude at a time. According to the Department of Energy’s own Web site, the Reserve was quite close to capacity at the end of October, capturing 694 million barrels of crude.
Conventional wisdom holds that the government should only go into competition against private traders when markets are sanguine and prices are low. According to a Senate source, Democratic senators are stupefied as to why the administration would be stockpiling oil at a time of record prices and jittery markets. They are not alone. Business media reports quote oil analysts as saying the move makes no sense and seems perfectly timed to drive up the price of oil and further destabilize oil markets.
In response, the White House expressed “dismay” over high oil prices, watching those prices rally more than 15 percent between Oct. 8 and Oct. 19, “driven by fears about tight winter supply and a weakening U.S. dollar, which has propped up prices for oil and other commodities like gold,” according to Reuters news service (http://www.reuters.com/article/businessNews/idUSN1929571620071019.)
This brings us to the second of two Bush administration tactics that critics claim have worked to bolster oil prices. The first is incredibly bad timing for Strategic Petroleum Reserve purchases. The second is the weakened U.S. dollar, squandered into near-oblivion by seven years of uncontrolled, exhaustive spending habits, driving its value further and further down on international exchanges.
It is not often mentioned in the media but a major fear of oil-industry experts that the dollar’s weakness will soon drive Middle Eastern oil markets to start trading oil in euros rather than in dollars. If $100 per barrel looks high now, it will look cheap after markets shift to petro-euros. To these two factors I would add a third: saber-rattling.
Invading Iraq was supposed, in part, to guarantee the United States a reliable (implication, cheap) supply of oil. It and threats whether implicit or explicit against other nations by the Bush administration has done exactly the opposite. It has rattled the markets and made oil more expensive.
Both parties know better than to discuss the possibility of price controls, which failed miserably in 1973-74. But if Democrats controlled the White House or possessed a veto-proof majority in Congress, one has to wonder whether oil companies and oil markets would be acting differently.
(Bonnie Erbe is a TV host and columnist. E-mail bonnieerbe(at)CompuServe.com.)