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Bush's $15 Per Barrel Blunders

From the Los Angeles Times
Rosa Brooks: Bush's $15-a-barrel blunder
Foolish foreign policies are helping jack up gas prices.

May 26, 2006

WITH GAS prices higher than they've been since the 1979 oil crisis, consumers and politicians from both parties are desperately seeking someone to blame.

It's tempting to go after big oil companies such as Shell and ExxonMobil. After all, they're chortling over their quarterly profit figures while the rest of us are miserably tightening our belts.

But righteous indignation over windfall oil company profits shouldn't blind us to the real scandal. The current high gas prices have more to do with foolhardy Bush administration policies than with greedy oil companies.

In the global marketplace, the price of oil is a simple function of supply and demand. When supply is low and demand is high, prices go up. And on both sides of the supply-and-demand equation, American consumers can thank the administration for the sorry situation we're in. The administration's irresponsible domestic energy policies have helped boost the global demand for oil, while its feckless foreign policies have helped reduce the global supply.

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On the domestic policy front, it's old news that the Bush administration has long thwarted meaningful efforts to reduce U.S. dependence on oil. Despite President Bush's admission in this year's State of the Union speech that the U.S. is "addicted to oil," his administration has made few serious attempts to develop conservation programs, tighten auto fuel standards or invest in alternative energy sources.

On the foreign policy front, administration blunders from Iraq and Nigeria to Venezuela and Russia are helping to ensure that global oil production is far lower than it could be. Yet the administration has mainly gotten a free pass on the ways its policies contribute to high gas prices for U.S. consumers.

Start with Iraq, where the Bush administration's inability to provide security has caused Iraqi oil production to plummet. Iraq has the world's third-largest proven oil reserves, and before the U.S.-led invasion in March 2003, Iraq was producing 2.5 million barrels of oil a day. In 2005, production was down to about 1.8 million barrels a day. So far, the outlook for 2006 is little better.

Or take Nigeria, where the administration has shown no interest in pushing for government reforms in the troubled, oil-rich Niger Delta. Disputes over the share of oil profits that are returned to impoverished local communities have led to severe disruptions in production. In January, militants blew up pipelines and kidnapped several employees of foreign oil companies; in early May, more than 150 people died when another pipeline exploded, probably as a result of vandalism. As a result of the recent disruptions, oil production is down 20%.

Then there's Venezuela, which was the fourth-largest supplier of oil to the U.S. in 2005. The Bush administration's endorsement of a failed 2002 coup against President Hugo Chavez poisoned already tense relations between the U.S. and Venezuela, and Chavez has been using Venezuelan fiscal policy to thumb his nose at Washington ever since. In recent months, Chavez has hiked taxes for foreign oil companies and seized control of many foreign-owned oil drilling projects. Such moves give foreign companies an incentive to jump ship, which could lower Venezuela's already flat production levels and both moves were paralleled by spikes in global crude prices, caused in part by market fears about reduced future supplies.

In Russia, by turning a blind eye to President Vladimir V. Putin's authoritarian crackdowns, including the forced nationalization of oil giant Yukos, the Bush administration has contributed to slowing Russian oil production. Then there's Iran, the world's fourth-largest oil producer. The administration's stubborn refusal to negotiate directly with Iran is exacerbating the stalemate over Iran's nuclear ambitions. If there's a military showdown or stepped-up sanctions against Iran the global oil supply will take another huge hit. Fears of such a crisis have already contributed to the high oil prices we're experiencing.

If the U.S. is truly concerned about energy security, we should shift from a foreign policy that alternates incoherently between selective inattention and sudden spurts of bullying to a foreign policy based on engagement, transparency and the promotion of genuinely democratic political and economic development. If we can't do that, we'd better get used to bicycling to work.

In a sense, high prices at the pump are a covert tax U.S. consumers pay to cover the expenses incurred by foolish Bush administration foreign policies and it's even possible to fix a dollar cost to those policies. Applying rules of thumb developed by the U.S. Energy Information Administration, David Goldwyn, former assistant secretary of Energy for international affairs from 1999 to 2001, estimates that roughly $15 of the $70-a-barrel cost of crude oil is because of production disruptions that a more focused U.S. foreign policy would have minimized or prevented.

Now who said the Bush administration refuses to raise taxes?

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