Monday, June 02, 2008
A Dare for Paulson ... or the Candidates
There are no simple or quick remedies for this, and let me be clear in stating that the Gulf region alone cannot alleviate the pressures in global oil markets. High oil prices are the result of supply and demand factors that are likely to persist for some time. Supplies have been affected by low capacity expansion and declining yields, while demand has surged largely due to growth in emerging markets. Speculation and the depreciation of the dollar are likely only small factors behind oil price increases.
So ... the surge in oil prices may last for a while, it cannot be solved simply by getting "the Arabs" to pump more, and it isn't something largely caused by speculation. So essentially Paulson wiped out the three excuses/solutions proffered by elected U.S. politicians.
We are also seeing continued fallout from the way elected politicians dealt with the Dubai ports debacle a few years back. Paulson is asking the Middle Eastern oil producers to open up their markets to more U.S. investment, and then he gets this handed back in his face. He noted this in his remarks in Dubai: "I have met with many leaders from the Middle East who ask if the United States really continues to welcome foreign investment. Some here worry about growing protectionist sentiment in the United States, and they also worry specifically that U.S. sentiment toward Middle East investment has been permanently affected by the Dubai Ports World case. " He then went on to reassure his audience that most foreign investment in the U.S. coming from the region has in fact been approved (and he didn't say so openly, but it is clear that not only is it approved, we actually need these continued inflows for our own economic health.)
So my "dare"--deliver these speeches here in the U.S. before domestic audiences, not a "safe one" thousands of miles away. And let's see if any of the candidates adopt any of Paulson's clear thinking in their own remarks.
America wanders further and further from reality. After all, Cheney deludes himself that the USG can create new reality "cause we're an empire now".
"Oil prices would be far lower if the US didn't threaten to attack Iran (sorry, that is "all options are on the table") and other countries weren't scrambling to stockpile."
Is there data showing that strategic petroleum reserves have recently increased? Commercial inventories aren't moving out of their normal band of fluctuation.