Editorials: Rise in oil price: Fact and fiction

Editorials: Rise in oil price: Fact and fiction

FOLLOWING fast on the decision to boost oil production this month by 300,000 b/d, the Kingdom is to increase this by a further 200,000 b/d next month in the hope of bringing some sanity to an out-of-control market. Given that supply already exceeds demand, this should push down the price. We say, “should”. The fact is that no one knows if it will. The 300,000 b/d rise initially seemed to have stabilized the market but it was hoped it would do more and yesterday, despite the further announcement, prices hit fresh highs. The fact is that with speculators forcing up the price ever higher in order to scoop up profits, production increases are going to have limited effect. Producers no longer have the wherewithal to end this irresponsible destabilization of the market. No one, however, can say that Saudi Arabia is not acting responsibly or decisively — although that is precisely what the media in some countries has been trying to claim in the past few weeks. The way Saudi oil policy has been presented in the US media in particular has been little short of dishonest. The Kingdom was accused of refusing President Bush’s requests to pump more oil, the inference being that it is happy with sky— high prices. The 300,000 b/d increase was ignored and the explanation that demand for extra oil is not there was clearly considered a feeble excuse. Quite clearly the Saudi-bashers thought that the Kingdom should flood the market. But Saudi Arabia cannot go overboard. It wants the price down, but equally it cannot go for overkill. A sudden massive hike — say, by million barrels a day — would have seen prices going through the floor. That would be just as destabilizing as the present situation.

Saudi Arabia is not alone as the target of consumer nations’ anger and frustration; all the oil producers, or at least all the oil producers in OPEC, have come under attack. But that anger is misdirected.

The producers have certainly benefited, but the rise was not their doing. The speculators are not based in Riyadh or Dubai or Teheran or Caracas; they are based in the very places where the accusing media resides — in London, New York, Tokyo, Singapore and the rest of the world’s major financial centers. Moreover, the producers are fully aware of the dangers of excessive prices. It will push consumers to look to other sources of energy. This week’s announcement by Honda that it has started production of the first car to run on hydrogen and electricity is a sign of things to come.

By increasing output by half a million b/d, Saudi Arabia is doing its best to bring down prices. What about the governments of consumer countries where rocketing prices have triggered strikes, in turn causing petrol shortages? With the tax take on petrol based on the price of oil, they have been raking the money in. In Europe, for example, the tax take on a liter of oil is as much as 70 percent. Consumer governments could reduce it and thereby the price of petrol to the levels they anticipated when they drew up their 2008 budgets. In refusing to do so, they make themselves as much part of the problem as the speculators.

Saudi Arabia has acted responsibly in the interest of economic stability; why cannot they?

Rebuilding global trust in America

REBUILDING global trust will be the major task of the next US president,” says Britain’s Guardian in an editorial yesterday. Excerpts:

The mere prospect of Mr. Bush’s departure is enough to lift spirits (abroad). A study of 24 nations around the world, conducted by Pew, found that the image of the US had improved, but that the optimism was driven by the impending regime change in Washington. Even so, the damage Mr. Bush has inflicted on America’s image is impressive, especially with close allies like Turkey: Only eight of the nations surveyed had majorities with a favorable view of the US.

Rebuilding global trust will be the major task of the next US president. The last thing he should think about is continuity, the idea that Bush-era polices are somehow set in stone. Nothing could be more toxic than the notion that the next president will carry on the policy of “coercive democracy” — as Scott McClellan, Mr. Bush’s former press secretary, phrased it — and that the next country to feel it will be Iran. The first casualty of a Kosovo-style air campaign on Iran’s nuclear facilities would be the Iranian people. The second casualty would be the Iraqi people. Little that Mr. Bush has done in the Middle East adds up to a coherent strategy, and nothing in the case of Iran, which has blossomed under his presidency. As a result, Iran’s nefarious regional influence now extends from the deserts of Afghanistan to the shores of the eastern Mediterranean.

The president’s valedictory tour of Europe, just like his recent tour of the Middle East, is a reminder of just how much his personal authority has shrunk. Redressing the errors of the last eight years cuts both ways. Europe’s leaders have not covered themselves in glory for the way they stood up to Mr Bush when he was at the height of his power. Because they did not. They looked the other way over extraordinary renditions or dabbled in the dark art themselves, as British intelligence officers did with detainees tortured in Pakistan.

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