Bob Tippee
Editor
The Organization of Petroleum Exporting Countries drew first blood in a spat with US President George W. Bush.
After a Mar. 4 meeting with King Abdullah of Jordan in Washington, DC, Bush reprised for reporters his January appeal for more oil from OPEC (OGJ, Jan. 28, 2008, p. 72).
"I think it's a mistake to have your biggest customer's economy slow down or your biggest customers' economics slowing down as a result of high energy prices," Bush said the day before an OPEC meeting.
After OPEC met, leaving production targets unchanged, President Chakib Khelil blamed high oil prices on "mismanagement of the US economy."
Khelil, Algeria's energy minister, said: "If the prices are high, definitely they are not due to a lack of crude. They are due to what's happening in the US."
While OPEC may be exercising more caution than is necessary, Khelil is right.
Low inventories cited by the Bush administration to demonstrate a need for more OPEC oil don't explain crude prices above $100/bbl. They're not that low.
Demand growth is slowing. Major production projects will come on stream this year. Prices should be falling.
OPEC knows this and legitimately worries about a second-quarter demand slump that might be deeper than usual.
Crude prices are high and rising not because a weakening market has too little supply but because oil, like other commodities, is serving as a haven for cash frightened away from other investments.
Much of that phenomenon does reflect US mismanagement of its economy.
The housing credit fiasco shouldn't have happened. The US shouldn't be aggravating food-price increases by burning corn-based ethanol for fuel. It should worry about runaway federal spending and the weakening dollar. It should allow oil and gas leasing of locked-up federal land.
And Bush should quit spouting impossible dreams that would be economically ruinous to pursue.
"America has got to change its habits," he told a renewable-energy conference Mar. 5. "We've got to get off oil."
He wants more oil now but no oil later. No wonder markets are shaky. No wonder OPEC's getting testy.
(Online Mar. 7, 2008; author's e-mail: [email protected])