70% of the worlds oil still comes from the Gulf BTW.
Its a good job GWB has made that area much safer and more stable...
--------------------------------
Rising oil prices threaten US economy
By Stephen Evans
BBC North America business correspondent
Can there be a greater temptation for politicians than to have control of an asset that may ensure they keep a grip on power?
Many Americans panic as petrol prices rise above $2 a gallon
So it is with President Bush now. So it was with President Clinton in the autumn of 2000.
The asset in question is oil in the form of the Strategic Petroleum Reserve.
With fuel prices at the pump bumping what is for Americans an outrageous $2 (£1.13) a gallon, the temptation might be for Mr Bush to put the odd million barrels of the national reserve on the market to ease prices and voters' pain.
After all, the Clinton administration released 30 million barrels two months before Vice President Al Gore stood - on the Democrats' economic record - against George W Bush four years ago.
Little good did it do Mr Gore.
Firstly, he lost. Secondly, the price of crude oil did drop - from $37 a barrel to $30 a barrel in the first few days, but then rose back to $36 a barrel. It then fell nicely because of other factors until, after the election, it was down to $32 a barrel.
The lesson for politicians: markets are wiser than you think.
Not that Mr Bush seems to need to learn that. He is, apparently, resistant to the idea of using the Strategic Petroleum Reserve to manipulate oil prices downwards, despite the urgings of Democrats.
Political sparring
Mr Bush ordered that the reserve be built up after 11 September 2001 as a buffer against cataclysmic global events.
The reserve is currently just below 660 million barrels but the aim is to raise it to 700 million barrels next year.
Tighter economic times for customers and stores mean tighter political times for Mr Bush
Perhaps, Mr Bush knows that any release of oil would be a drop in the ocean and unlikely to have any lasting effect. Perhaps, Democrats know that too, but also know a good political cause when they see one.
John Kerry, their contender, is being more cautious than his party colleagues. He wants no increase in the size of the reserve, but he is not calling for a cut either.
Rising costs
It is true that the price of oil will depend on politics, but on politics far from Washington. The big factor will be the violent street politics of Iraq rather than the softer brand that accompanies an American election campaign.
The Gulf produces 70% of the world's oil, so any destruction of installations there will push prices higher. Petrol pump politics in the US will follow politics in Iraq.
Already, there is some political pain in the US.
Apart from a rise in the petrol price to above $2 gallon - a level regarded as high by Americans - companies are pushing up prices to cover rising fuel costs.
Wal-Mart, the world's biggest retailer, has warned that its customers could be spending perhaps $7 a week more on fuel because of the rises. And that means less spent on its goods.
Tighter economic times for customers and stores mean tighter political times for Mr Bush.
Moreover, rising oil prices can do nothing to keep inflation dead and buried with what we thought was a stake through its heart. For a decade, ever sharpening competition led to the belief that relentlessly rising prices were a strange concept confined to history books. Now, the word, if not the thing itself, is back.
Rising or falling?
However, we should not be too gloomy.
There have been three big spikes in the price of oil in the last 50 years: after the Yom Kippur war 30 years ago; after the Iran-Iraq war in 1979; and after the previous Gulf war in 1991.
There's unlikely to be any cutting of the "terrorism premium"
Each time, the high price of oil was followed by a recession. This time, the real price of oil is not high by comparison, once inflation is taken into account. According to Deutsche Bank, "it would be wrong to assume that the current nominal oil price is extreme".
"Indeed, in real terms, prices are only 6% above their 1971-2003 average," the bank says.
Prices are high relative to the recent past, but only at the levels last witnessed four years ago. The question is whether they are on the way up or down.
Political uncertainty
It has to be said that the risks are on the up side. Few expect the uncertainty in the Middle East to diminish in the near future so there is unlikely to be any cutting of the "terrorism premium". The petroleum exporting cartel Opec may increase production somewhat but it is not far from capacity now. Similarly, refineries in the US are working at near to full tilt.
In the longer term, matters look even tighter. It is estimated that the global use of oil will rise by 50% in the next 20 years. Much of that extra demand will come in China and India.
The most doleful will note that most of the world's political tension today stems from conflicts over resources either water or oil. Political uncertainty is unlikely to diminish.
http://news.bbc.co.uk/1/hi/business/3724357.stm
Its a good job GWB has made that area much safer and more stable...
--------------------------------
Rising oil prices threaten US economy
By Stephen Evans
BBC North America business correspondent
Can there be a greater temptation for politicians than to have control of an asset that may ensure they keep a grip on power?
Many Americans panic as petrol prices rise above $2 a gallon
So it is with President Bush now. So it was with President Clinton in the autumn of 2000.
The asset in question is oil in the form of the Strategic Petroleum Reserve.
With fuel prices at the pump bumping what is for Americans an outrageous $2 (£1.13) a gallon, the temptation might be for Mr Bush to put the odd million barrels of the national reserve on the market to ease prices and voters' pain.
After all, the Clinton administration released 30 million barrels two months before Vice President Al Gore stood - on the Democrats' economic record - against George W Bush four years ago.
Little good did it do Mr Gore.
Firstly, he lost. Secondly, the price of crude oil did drop - from $37 a barrel to $30 a barrel in the first few days, but then rose back to $36 a barrel. It then fell nicely because of other factors until, after the election, it was down to $32 a barrel.
The lesson for politicians: markets are wiser than you think.
Not that Mr Bush seems to need to learn that. He is, apparently, resistant to the idea of using the Strategic Petroleum Reserve to manipulate oil prices downwards, despite the urgings of Democrats.
Political sparring
Mr Bush ordered that the reserve be built up after 11 September 2001 as a buffer against cataclysmic global events.
The reserve is currently just below 660 million barrels but the aim is to raise it to 700 million barrels next year.
Tighter economic times for customers and stores mean tighter political times for Mr Bush
Perhaps, Mr Bush knows that any release of oil would be a drop in the ocean and unlikely to have any lasting effect. Perhaps, Democrats know that too, but also know a good political cause when they see one.
John Kerry, their contender, is being more cautious than his party colleagues. He wants no increase in the size of the reserve, but he is not calling for a cut either.
Rising costs
It is true that the price of oil will depend on politics, but on politics far from Washington. The big factor will be the violent street politics of Iraq rather than the softer brand that accompanies an American election campaign.
The Gulf produces 70% of the world's oil, so any destruction of installations there will push prices higher. Petrol pump politics in the US will follow politics in Iraq.
Already, there is some political pain in the US.
Apart from a rise in the petrol price to above $2 gallon - a level regarded as high by Americans - companies are pushing up prices to cover rising fuel costs.
Wal-Mart, the world's biggest retailer, has warned that its customers could be spending perhaps $7 a week more on fuel because of the rises. And that means less spent on its goods.
Tighter economic times for customers and stores mean tighter political times for Mr Bush.
Moreover, rising oil prices can do nothing to keep inflation dead and buried with what we thought was a stake through its heart. For a decade, ever sharpening competition led to the belief that relentlessly rising prices were a strange concept confined to history books. Now, the word, if not the thing itself, is back.
Rising or falling?
However, we should not be too gloomy.
There have been three big spikes in the price of oil in the last 50 years: after the Yom Kippur war 30 years ago; after the Iran-Iraq war in 1979; and after the previous Gulf war in 1991.
There's unlikely to be any cutting of the "terrorism premium"
Each time, the high price of oil was followed by a recession. This time, the real price of oil is not high by comparison, once inflation is taken into account. According to Deutsche Bank, "it would be wrong to assume that the current nominal oil price is extreme".
"Indeed, in real terms, prices are only 6% above their 1971-2003 average," the bank says.
Prices are high relative to the recent past, but only at the levels last witnessed four years ago. The question is whether they are on the way up or down.
Political uncertainty
It has to be said that the risks are on the up side. Few expect the uncertainty in the Middle East to diminish in the near future so there is unlikely to be any cutting of the "terrorism premium". The petroleum exporting cartel Opec may increase production somewhat but it is not far from capacity now. Similarly, refineries in the US are working at near to full tilt.
In the longer term, matters look even tighter. It is estimated that the global use of oil will rise by 50% in the next 20 years. Much of that extra demand will come in China and India.
The most doleful will note that most of the world's political tension today stems from conflicts over resources either water or oil. Political uncertainty is unlikely to diminish.
http://news.bbc.co.uk/1/hi/business/3724357.stm
