Oil: George Bush has a point

UNLIKE President Reagan, Vice-President George Bush has never been able to remain above the din of domestic politics -- that is, to separate his public persona from the policies he espouses. Nowhere is that better illustrated than by the vice-president's recent concern over the freefall in the price of oil, expressed on his mission to the Middle East. There he promoted a shoring up of the international oil market. Critics quickly took to the airwaves. With his Texas petroleum links, it was said, Mr. Bush had hurt himself politically.

Perhaps. But the oil equation needs to be kept in fair perspective. Granted, the United States economy looks promising -- with Wall Street up, the economy growing, and inflation staying low. Still, there are problems. Unemployment remains high. Massive trade deficits, though narrowing, continue. Consumer demand is down and consumer debt remains at high levels.

Then there is oil. Workers in petroleum-related companies are being laid off, especially in the South. Banks that have made energy-related loans fret over losses. Capital spending is down for energy enterprises, which means slowdowns in such areas as construction and engineering. Further, new studies out of Washington suggest that the recent drop in oil prices may actually worsen the deficit this year, because of lower tax receipts.

What's the cutoff point where low oil prices mean more of a drag than a gain for the economy? The numbers vary. But studies suggest that the problems intensify below $10 a barrel.

That's the message, as we understand it, that Bush is conveying. And many economists would agree with him. The upshot? Congress and the White House need to explore options to ensure that the price of oil in the US does not plummet into a range where domestic exploration and output become unproductive and cease, where bank losses mount, and where more and more workers in Southern states (where workers often lack the cushion of strong unions that help win unemployment and other benefits) are thrown out of work. Washington should consider such steps as a surcharge on imported oil; promote use of new tax or other benefits to boost exploration; and sustain energy conservation more aggressively.

The desirability of low energy prices ought not to be dismissed. But, as Vice-President Bush argues, neither should the goal of domestic energy development -- which could be a casualty in the current downward price slide.