HOT TOPIC: “Soaring Gas Prices Hit Washington,” Washington Post 29 April 2006, p. A7.
ARTICLE: “Gas-Price Uproar Is Likely to Shift U.S. Energy Policy: Anxious Congress Weighs Tougher Fuel Standards, Ethanol and Hybrid Cars; Little Short-Term Impact Seen,” by John J. Fialka, Laura Meckler and Steve LeVine, Wall Street Journal, 29 April 2006, p. A1.
ARTICLE: “A Failure to Communicate? Big Oil Thinks It Has a Message, but It Isn’t Reaching Consumers,” by Kate Phillips and Julie Bosman, New York Times, 3 May 2006, p. C1.
OP-ED: “Let’s (Third) Party: Who will take on the energy crisis?” by Thomas L. Friedman, New York Times, 3 May 2006, p. A27.
ARTICLE: “U.S. Makers Facing Glut of S.U.V.’s As Gas Rises,” by Jeremy W. Peters, New York Times, 3 May 2006, p. C3.
ARTICLE: “Bolivia’s Energy Takeover: Populism Rules in the Andes,” by Simon Romero and Juan Forero, New York Times, 3 May 2006, p. A8.
ARTICLE: “Bolivia Nationalization Puts Investors Off Balance: Brazil Initiate Discussions With Other Governments About Potential Solutions,” by Geraldo Samor and Matt Moffett, Wall Street Journal, 3 May 2006, p. A7.
ARTICLE: “Brazil’s Petrobas Halts Investment Planned in Bolivia,” by Geraldo Samor, Wall Street Journal, 4 May 2006, p. A4.
OP-ED: “How Much Oil Is Really Down There? The SEC’s ‘proved reserves’ won’t tell us,” by Daniel Yergin, Wall Street Journal, 27 April 2006, p. A18.
COLUMN: “Premium pressure: George Bush fails to defend an inalienable right: cheap petrol,” by Lexington, The Economist, 29 April 2006, p. 38.
The gas “crisis” reappears for the summer driving season, right on cue. Washington is naturally “shocked” at the obvious market manipulation and price gouging, and politicians stand in line for photo-ops at local gas stations, venting their righteous indignation and ignoring the fact that America has gone out of its way in the past to allow domestic drilling or the building of new oil refineries, so voila! Now they’re going to fix it with a rebate or some showy hearings where oil execs are lined up with their right hands raised (the ultimate photo-op).
It is all just too pathetically predictable to warrant serious comment. Our crisis is nothing more than the piling up of our consumer choices over the past several decades, our willingness to make investments within our own country (especially in refining), and this weird public sense we have that cheap gas is an American right.
So now the market corrects many of those assumptions with the same level of indifference we've long displayed on the subject. And politicians are going to make this process better somehow? Or are they just likely to confuse the issue, as they so often do?
And yet the calls for “action” will be vociferous. Certainly Washington must take the lead, plying various industry players with all sorts of rigged incentives and sprinkling their districts with “much needed” research grants. All of this will be largely forgotten after the fall elections, when the grandstanding will serve no purpose, and the short-term impacts of all this huffing and puffing will be miniscule.
Big Oil will seek to explain itself, but since they’re big and oily, all will be regarded as evil propaganda.
Yes, yes. It’s all their oil companies’ fault, not our car culture, or our environmental culture, or our NIMBY culture. None of that matters.
So we’ll get grandiose calls for “Manhattan Projects” and--yeah baby!--an entire third party to take on this crisis.
Friedman quotes the quintessential DCer David Rothkopf as saying “We used to say the system is broken because it won’t respond until there is a crisis.” But now it’s even worse “because the system can’t even respond to a crisis!”
Smell the hubris there: Washington’s in charge of reality and economics and globalization. If only our “system” would wake up and start “Running the World” better (the title of Rothkopf’s book), we could fix things. This is the epitome of the DC view of the world: “We’re in charge!”
Of course, nothing could be farther from the truth in these matters, but no matter. The public loves to believe the President and Congress really operate the universe according to their own plans. That way we can blame them when things don’t turn out as planned.
Meanwhile, the market does it natural thing: it responds.
SUVs won’t sell as fast. New models will brag about fuel efficiency for the first time in a very long time. Oil companies will do more exploration in response to price. But no one will push for new production to enough of a degree to really drive down prices. Not this late in the Oil Age. Consumption is moving down the hydrocarbon chain inexorably. You can’t expect energy companies to stand watch on oil while it loses its top-dog position across the 21st century.
Of course, not everyone got that memo, so some governments will give into the notion that nationalizing their energy resources will make them more powerful over time, like Bolivia acting like it’s going to thumb its nose at the world by grabbing gas fields, when all it will really do is push its main customer, Brazil, into seeking sources elsewhere. Oh, and Petrobas will cut back its planned investments there to basically zero. CANYOUBELIEVEIT Sweater Man?
Meanwhile, the real culprits (India, China) behind the price pressure will go largely unnoticed in this ritualistic political frenzy in the U.S. Better that they do, though, since who knows what stupid trade tricks Congress might think up in retaliation.