Pump Prices This Summer
Can Saudi Arabia make or break Al Gore's presidential bid? Or, for that matter, Hillary Clinton's race for the Senate?
In the next few weeks, the oil giant of the world will likely nudge OPEC to increase petroleum production as a way to lower petroleum prices in the US, the oil-consumer giant of the world.
But if the OPEC cuts are too small, Americans will see high gasoline prices - above $1.50 a gallon - continue into the prime driving time of summer - and the height of the political campaign.
The inability of the Clinton-Gore administration to boost OPEC production could give the GOP an attack issue against Mr. Gore, who appears likely to be the Democratic nominee. (In New York, Mrs. Clinton already feels the political heat on home-heating oil prices from GOP rival Rudolph Giuliani.)
To fend off Republican criticism, Mr. Clinton sent his energy secretary to Saudi Arabia, Kuwait, and Norway last week to gently jaw-jaw them into boosting global production by 2 million to 2.5 million barrels per day.
But if OPEC opts instead for only a 1.2-millon-barrel jump at its March 27 meeting, the United States may be revisiting the politics of oil. In 1980, when OPEC production was low, the high gas prices helped Ronald Reagan beat Jimmy Carter. High oil prices will also help fuel inflation and thus higher interest rates that might drag down the economy and stock market.
What's working in Gore's favor is that some oil producers, such as Mexico, have tied their economic wagons to the US economy and can't afford to risk a US slowdown.
And last year's price-setting alliance between OPEC and several nonOPEC oil nations that drove up prices now has put Iraq in a powerful position to influence the market. Saudi Arabia doesn't like that.
The administration has wisely resisted calls from Gore rivals to release oil from the Strategic Petroleum Reserve. But it is rightly exploring a "time swap" that would let oil companies borrow from the reserve and return slightly larger amounts months later - if crude prices don't drop.
Opposing the oil cartel gently and not intervening in domestic oil markets too much is the best path for the government. Let's hope the politics of oil doesn't put that strategy over a barrel.
(c) Copyright 2000. The Christian Science Publishing Society