by John M. Curtis
(310) 204-8700

Copyright April 27, 2005
All Rights Reserved.

taging his latest publicity stunt, President George W. Bush hosted Saudi Crown Prince Abdullah at his Texas ranch, hoping to reassure a nervous public about spiraling oil prices. Meeting the Crown Prince was supposed to assuage itchy petroleum traders, whose feeding frenzy has nearly doubled the price of oil in one short year. Bush got it right that uncontrolled oil prices threaten the global economy, especially the U.S. that remains hopelessly dependent on foreign oil. Pushing the Saudis to increase production certainly helps but it doesn't deal with relentless energy traders pushing pump prices through the roof. No effort at the federal level has been made or attempted to regulate crude oil like is currently done with electricity. Blaming the current run-up on “supply-and-demand” gives oil companies and Wall Street a free pass, when traders bid prices into outer space.

      Promising to ramp up Saudi's production from its current 9.5 million barrels a day totally ignores how Wall Street controls crude oil and pump prices. Begging the Saudis to open the spigots makes good headlines but won't decrease U.S. dependence on foreign oil. Talking about ending dependence on fossil fuels doesn't jibe with asking the Saudis to increase production or, for that matter, pushing the Congress to open up the Alaskan National Wildlife Refuge [ANWR]. Drilling in ANWR won't solve the long-term problem of how the petroleum industry—especially refineries—seeks to fix prices and manipulate the market. “Supply and demand” cause the current run-up in oil and pump prices, said Secretary of State Condoleezza Rice, perpetuating the myth that worldwide demand outpaces current supplies. That's the same story used by Wall Street to boost oil prices, augment profits and hurt the economy.

      High oil prices punish consumers and contribute to an economic slowdown. Latest Gross Domestic Product [GDP] at 3.1% indicates that inflated pump prices is the latest punitive tax, robbing consumers of purchasing power. With the White House racking up astronomical deficits, it's unlikely that more tax cuts are in the offing. Federal Reserve Chairman Alan Greenspan continues his inflation-bias policy hiking interest rates. As the economy cools, Bush hits a brick wall, unable to use fiscal policy, namely, tax cuts, to stimulate the economy. He finds himself at Greenspan's mercy, who's currently trying to prop up a sagging dollar by raising rates. Photo-ops with the Saudi Crown Prince won't change a set of circumstances that has given U.S. and global oil companies unprecedented profits. If the current trend continues, the U.S. heads for a repeat of the stagflation under former President Jimmy Carter.

      Increasing Saudi oil production to 12.5 million barrels a day won't solve the problem of what Secretary of State Rice calls “supply and demand” problems. There's a difference between dwindling resources and manipulation by oil companies seeking to keep supplies low. Refineries go off-line when supplies increase and prices drop. Organization of Petroleum Exporting Countries [OPEC] doesn't want to see the price per barrel plummet. Only two years ago the price was below $20 per barrel, dropping gasoline below $1 a gallon. To offset this sharp drop, Saudi's oil minister Ali Ibrahim Naimi claimed that Saudi oil resources were running out. Then rumors circulated about China and India's increased demand, placing a heavy burden worldwide petroleum supplies. Two years later, oil prices went through the rough. Yet the real story involves slick PR and manipulation.

      Five-years into his presidency, Bush has suddenly become an environmentalist and advocate of alternative fuels, yet, at the same time, puts his hopes in the Saudis. While Condi talked about exploding demand and dwindling supplies, Prince Abdullah's chief policy advisor Adel Jubeir blamed high gas prices on U.S. refinery capacity. “It will not make a difference if Saudi Arabia ships and extra 2 million barrels of crude oil to the United States if you cannot refine it,” said Jubeir, getting it only partly right. Yes, the U.S. has capacity problems when refiners deliberately decide to take production off-line. If no refineries have been built since 1976, it's because there's already enough capacity. Building more refineries would end the feeble excuses blaming spiraling pump prices on low capacity. Today's oil and gas problems stem from oil companies manipulating the market and gouging consumers.

      Looking to new technologies makes great headlines but won't rein-in oil companies currently squeezing the market. Nor will it change Wall Street's trading practices where clever specialists create any propaganda to boost commodity prices. “Technology is the ticket,” said Bush, advocating more nuclear power and alternative energy to offset dependence on fossil fuels. That's all well and good, but, once again, tomorrow's atomic or alternative energy won't change the business practices of today's fossil fuel industry. “This problem did not develop overnight and it's not going to be fixed overnight,” said Bush, blowing more smoke about how oil companies manipulate today's “supply-and-demand.” When oil was under $20 a barrel and gas $1 a gallon, nobody talked about China and India usurping the market. Making more excuses won't fix the problem.

About the Author

John M. Curtis writes politically neutral commentary analyzing spin in national and global news. He's editor of OnlineColumnist.com and author of Dodging The Bullet and Operation Charisma.

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