Dance of Oil
December 7, 2000

by Curtis Lang & Jim Ridgeway		print version
		print version (graphics)

This article originally appeared at OnMoney.com..

It looks as if oil politics could be the vehicle for George W. Bush to define his administration's geo-strategic principles, solidify support in Congress,  reward his supporters in the energy "bidness" and unify the country behind his foreign policy, just as it was for his father. That does not necessarily  mean a repeat of the Persian Gulf War, but oil provides an ideal vehicle for restating the imperial American policy abroad.

And interest in oil politics and the economics of oil is heating up as temperatures fall across the American heartland. Price hikes of upwards of 40% are  expected in what the weathermen are saying will be a very cold winter.

That could even mean some threat to continued robust economic growth. Last week Alan Greenspan spent a good part of a speech to America's community  bankers discussing the "worrisome" oil situation.

But for Bush there's an upside to Greenspan's concern. With an "energy tax" dampening corporate earnings and consumer spirits, high oil prices could be a   major component in a Bush-Greenspan accord that would allow for the tax cuts so dear to Bush's heart while accommodating Greenspan's concerns about an  overheated economy. In effect, Bush would be enabled to stimulate the economy without interest rate cuts.

Greenspan might agree to maintain a "neutral" monetary policy if Bush assures him that in W's administration there will not be a replay of the Brady-Darman  scenario. Greenspan mightily disliked Bush Sr.'s advisors' meddling in Fed policy matters, and would look kindly on Bush Jr. promises to keep hands off  Greenspan's turf.

Alternative scenarios

One logical scenario in the current oil crisis, unlikely to find favor with a Bush administration, is a crash program of intensified energy conservation and  renewable energy with an emphasis on gasohol and other non-petroleum "bio-fuels."

Germany and other European countries, Japan, Brazil, and India are already headed in such a sustainable direction.

The United States' reluctance to kick the oil (and coal) habit that was so evident during eight years of Clinton/Gore will only become more pronounced  under a Bush/Cheney takeover. As the rest of the world moves steadily toward the solar age in the mid-21st century, imperial Uncle Sam, by far the  world's largest oil consumer, stands to be left out in the cold as the ultimate energy dinosaur, along with a handful of Middle Eastern sheikdoms and despots.

The next oil crisis

In the wake of Iraq's decision to cut off crude oil exports, media attention has focused on a task force of energy experts from the Council on Foreign  Relations and the James Baker Institute at Rice University in Houston, who have been pulled together to advise Bush on what direction to take.

The task force, cosponsored by the Council and the Baker Institute at Rice University, will be headed by Edward L. Morse, executive adviser at Hess Energy Trading Company. The Baker Center's Amy Jaffee is the project director and the Council's Military Fellow Col. James E. Sikes, Jr.(USA) is the  project coordinator.  

"For the new administration, this whole event is going to raise the question of energy security and energy policy to the very top of the docket," Baker Institute's Amy Jaffe told The Financial Times this week.

Bob Manning of the Council, who has just written a book on the importance of the growing Asian drain on limited oil supplies, says the group is now just forming and a report won't be ready until sometime this spring.