The Strategic Petroleum Reserve, according to Wall Street Journal columnist Paul Gigot, “was set up to deal with supply problems, not to deal with fluctuations in price.” The Clinton administration, in Gigot’s view, is guilty of using the reserve for the latter purpose. Energy Secretary Bill Richardson denies the charge; the administration’s decision to dip into the reserve was “about disruption of supply. … We are not trying to manipulate prices.”
Stop! You’re both wrong! Unless the fabric of the universe has changed since I took Econ 101, the supply of oil and the price of oil are more closely related than either Gigot or Richardson implies. The reason we’ve seen the “fluctuations in price” that Gigot considers insufficient grounds for intervention is that there have been “supply problems,” which he deems sufficient grounds. And, as for Richardson: Even if we accept his contention that the administration is focusing on the supply problem, there’s no doubt that its solution will in some sense “manipulate prices.” That is inherent in any significant use of the oil reserve.
Am I just being pedantic? Hey, it’s a living. Besides, I truly do think the current debate over when to use the oil reserve gets muddied by two misleading dichotomies. First is this supply-price dichotomy: the idea that, in deciding when to intervene, there’s a fundamental difference between using price as your criterion and using available supply. Second is the idea that there’s a clear, bright line between ample supplies (or acceptable prices) on the one hand and a supply crisis (intolerable prices) on the other. In truth, of course, there’s a continuum of prices, a continuum of supplies—and deciding when the situation is bleak enough to warrant intervention is the kind of judgment call presidents are supposed to make.
Consider the Bush administration’s 1991 use of the oil reserve, which Republicans are now hailing as a paragon of good government. There was no epic supply crisis then. Even amid the panicked buying induced by the onset of the Persian Gulf war, oil prices were lower than they were this month before the Clinton administration intervened. And the fact that we were at war in 1991 doesn’t turn unpleasantly high oil prices into a “national security” problem. Our fighter pilots in Iraq weren’t being told to fly at 55 mph to conserve fuel; and, in any event, Iraqi troops weren’t exactly at our doorstep.
The fact is that the Bush administration, like the Clinton administration, was responding to what Paul Gigot dismissively refers to as “fluctuations in prices.” On the day President Bush authorized the release—1.1 million barrels a day for a month, roughly the same as the Clinton administration’s release—the White House said its goal was “to promote stability in world markets.” Price stability? Supply stability? Yes.
I suppose it goes without saying that, of all the melodramatic uses of the phrase “manipulate prices” over the last week, Dick Cheney’s (“Al Gore is for releasing oil … in order to manipulate prices”) wins the chutzpah award. As has been widely noted, Cheney, back in his oil tycoon days, applauded OPEC’s upward manipulation of prices. And OPEC deserves the “manipulator” label more richly than the Clinton administration does. After all, the Clinton administration’s “manipulation” will move prices closer to their natural market level—the level they would be at if OPEC hadn’t artificially constricted supply in the first place. (Republicans, I had always thought, liked prices to be at the free-market level.)
Granted, Al Gore has a bit of explaining to do: As various people have noted, given his concerns about global warming, you’d think he’d like high oil prices as a way to discipline the use of fossil fuels; in fact, he has (commendably) championed a fossil fuels tax in the past. On the other hand, he’s not now championing a net reduction in oil prices: The administration’s plan is to replenish the petroleum reserve after the winter, thus “manipulating” prices upward just as much as it is now “manipulating” them downward. So the entire maneuver is actually environment-neutral (though not, of course, election-neutral).
I-told-you-so department: An excellent piece by Roger Cohen in this week’s New York Times “Week in Review” section charts the recent transformation of anti-globalization crusaders from scruffy Seattle savages to dignified activists. We are seeing “an increasingly sophisticated, intellectually robust protest movement, mixing idealism with pragmatism, that is fast playing catch-up with the forces of multinational capital.” Cohen cites an activist who, having observed the frequent inability of national authorities to govern globalization, is working at the supranational policymaking level—trying, for example, to use “international law to compel the World Bank to avoid loans to any projects that might compromise human rights.”
As regular readers might guess, the Earthling is as happy as a clam about this trend toward world governance. In fact, in a piece of mine that appeared in the New Republic in January, I contended that it is in the interest of radicals and capitalists alike for radicals to get civilized in exactly the fashion Cohen describes. I wrote:
One way or another, people who feel threatened by globalization will make their influence felt. Either they’ll modulate globalization by linking up with like-minded groups abroad to help shape international rules or they’ll take the economic-nationalist route and lobby for the sort of trade barriers that, in addition to starting trade wars, often involve xenophobia and nativism. The way to keep these people from being sheer protectionists—and, in some cases, from morphing into full-fledged Buchananites—is to turn them into WTO lobbyists, which means making the WTO a body worth lobbying [e.g., making it a place where environmental and labor issues are addressed]. Put suits on those scraggly rabble-rousers and send them to Geneva!
(This week, of course, they’re in Prague at the World Bank and IMF meetings, and many of them aren’t yet wearing suits. But even the scruffier ones are actually protesting for something—debt relief, according to this morning’s news.)
Cohen closes his piece by noting that “the evolution is natural enough: world politics, however cumbersome, for a global economy.” Precisely! In fact, I’d go so far as to say that world governance is the natural culmination of human cultural evolution to date. Remember where you heard it first.