Look! Over here! It's Kobe Bryant...er, Scott Peterson...uh, J-Lo and Ben!
Okay, so it's none of those. In fact, it's just a story about an incredibly un-sexy subject - energy prices.
But, I'm here to argue that it may be more likely that such dull headlines are more indicative of George Bush's political future than those on Yellowcake or the Hunt for Wily Old Hussein.
Why? Because as the Big Dog resurfaced this week to remind us Democrats once more, "It's the economy, stupid" and I tend to think, particularly after looking back the last year's purported "recovery", that oil and natural gas prices and supplies were more important than many analysts give credit. And with more dark clouds on the energy supply/price horizon, perhaps it's an issue we should be watching more closely.
But that's not to say that even some energy headlines don't find a way of drawing attention. This one sucked me in last night:
Oil tumbles on news of brothers' deaths
By Nigel Wilson
24jul03HOPES that the deaths of Saddam Hussein's sons will result in fewer attacks on Iraq's oil facilities are leading to predictions that international crude oil prices will continue to fall.
The announcement that Uday and Qusay had been killed during a US raid on a house in the oil city of Mosul immediately sent crude oil for August delivery down $US1.59, or 5 per cent, to $US30.19 a barrel on the New York Mercantile Exchange - the biggest decline for more than a month.
While I wasn't particularly surprised to see oil fall upon the news of demise of Saddam's notorious sons, I was rather stunned to see that oil was up over $30/barrel. See, I had been conditioned last winter and spring to believe that once the US controlled the Iraqi oil fields, and with no substantial well fires to extinguish, oil would be flowing like wine at a Bacchanalian festival, driving prices through the floor.
But no one prepared us for the current scenario. In fact, I hadn't read of such problems until farther down in this article:
Looting and resistance attacks on Iraq's oil facilities meant production has barely met Iraq's own demand, let alone make a contribution to world output....
Before the invasion, Iraq pumped about 2.5 million barrels of oil a day.
It produced just 640,000 barrels a day last month, according to Bloomberg estimates.
The article concludes with the speculation that now the evil Saddam siblings are dead, the resistance which has bogged down the reconstruction of Iraqi oil production facilities will evaporate, and, as promised, oil will soon be flowing like wine.
But why has the deficit in Iraqi oil had such an impact on world prices? Weren't we assured that OPEC had already "factored in" possible problems with reconstituting Iraq's production and/or even destruction of energy assets, with member states increasing production to balance out such upward pressures on prices?
The answer lies in the Administration's constant theme that invading Iraq will solve a host of US problems, skyrocketing energy prices among them. But Iraqi oil was always just one small piece of the complex US energy puzzle, and recently, a myriad of other more significant pieces are causing the Administration consternation. Last winter, it was the Venezuelan crisis, then a Nigerian white-collar strike, and finally bickering within OPEC over how much and how long supplies should be increased. More recently, Hurricane Claudette disrupted oil production in the Gulf of Mexico, and once again, Nigerian oil workers are threatening to strike as early as mid-August.
And I haven't even touched on the disaster now facing long-term natural gas output and prices, which even Alan Greenspan has warned may disrupt his much touted economy "recovery".
High energy prices have both a direct, and psychological effect on an economy and its consumers. The first, Bush may be able to deflect with his tax cuts and "stimulus" plan, although that has yet to be seen. But the "pain factor" which consumers, suddenly hit with higher prices at the gas pump and in their electric/heating bills, is much harder to address, unless, of course, Bush & Co. think American families won't mind handing over their child tax credit checks to Exxon and Shell.
Posted by MB at July 24, 2003 06:19 AM | TrackBack