WASHINGTON -- A middle-level official for one of America's
hard-pressed airlines two weeks ago looked at the aviation fuel situation
and fired off a confidential memo to a colleague: "I am afraid President
Bush is going to be a one-term president, like his father. The U.S. economy
does not need $30 (a barrel) oil. I can see the (gasoline) lines again.
'It's the economy.' Iraq will bring down another president."
The writer of this anguished prose is no political expert, and
his death sentence for George W. Bush is at least premature. What he is
expert about is the global fuel situation, and he doesn't like two
activities by the Bush administration. First is the Department of Energy's
continued purchase of oil for the Strategic Petroleum Reserve (SPR). Second
is the beating of war drums in preparation for an attack on Iraq with
incalculable impact on oil prices.
The anguish is not limited to one airline executive or, indeed,
to even the airline industry (though its economic miseries would be
compounded by an upward spike in oil prices). Fretting over oil explains
some of the stock market malaise and the morose outlook by investors. If the
Bush administration is alert to this situation, there is no sign it is doing
anything about it.
The decision by Energy Secretary Spencer Abraham of steadily
pouring oil into the SPR to near its capacity of 700 million barrels may
seem ironic in view of past Republican criticism of the reserve as an
interference with markets. It is an indirect and understandable byproduct of
the 9-11 terrorist attacks, aimed at giving the United States an insurance
policy against calamities shutting off the course of oil.
Nevertheless, the government's purchase of $30 oil astounds
private sector analysts, who believe that supplying the SPR has contributed
significantly to the summer's boost in crude oil prices. To these business
economists, the administration is oblivious to what it is doing to the
market. That issue surely is not on the top of its priorities.
This government intervention comes at a time when oil prices are
being boosted by both the known and the unknown in the Middle East. The
known is President Bush's firm commitment for a "regime change" in Iraq,
which has already reduced Iraqi exports by more than 1 million barrels and
surely will cost more if and when it comes to war. The unknown is what
impact it will have among other oil-producing countries.
The petroleum market is "spooked by all the war talk," in the
words of one analyst. The atmospherics of U.S. Iraqi policy -- disclosure of
alleged Pentagon secret war plans and criticism by the other NATO members --
have further roiled the oil market.
The overriding problem is that the world today needs more, not
less, oil at a time when global environmentalists are aligned against
boosting production. That is reason enough for the Bush administration not
to risk its Saudi Arabian oil supply by joining the conservative Republican
campaign against the royal regime. Political instability in Venezuela poses
another potential reduction. While Bush is criticized for snuggling up to
Russia's President Vladimir Putin, Russian oil exports have prevented
perhaps another $5 raise in oil prices.
What the Bush administration can do about this situation is
limited. Private oil purchasers would like the heat put on friendly
countries like Mexico and Norway to stop cooperating with the OPEC cartel.
That is much easier said than done, and of doubtful effectiveness.
The government's upward pressure on oil prices could be eased by
not filling up the SPR, but that step too seems unlikely. While Democratic
Sen. Charles Schumer of New York wants the government to put some of its oil
reserves on the market to stabilize oil prices, the White House on Aug. 20
reiterated that Bush has no such intention.
Instead, White House spokesman Ari Fleischer called for passage
of the Bush-backed energy bill to expand domestic oil drilling -- including
the proposal for the Arctic National Wildlife Refuge (ANWR). That is not
going happen in the Democratic-controlled Senate, leaving Republicans to
hope that the worried airline company executive is not much of a political
prophet.
