How did Bush team botch oil policy?

Edward Goldberg

Published on November 3, 2004
© 2004- The Baltimore Sun

NEW YORK - Two and a half years ago, while the war for Iraq was still being contemplated, I took a taxi in Washington, D.C., where the driver nonchalantly asked, "Hey, mister, do you invest in the stock market?" I replied in the affirmative and asked why he wanted to know.

"Well," he said, "if you invest in the market, I would recommend oil stocks." I again asked why. And he replied, "Because right now, 2 percent of the people in China can afford cars, but what happens when 5 percent of the people in China own cars?" He might have been a little off on the exact percentage of Chinese car owners, but his fundamental logic was sound. Oil, the prince of the old technologies, not even discussed in Silicon Valley terms, is as important to globalization as any megabyte-driven innovation.

It was easy to ignore the importance of oil in the past 14 years of high tech. Caught up in the excitement of the digital revolution, we let ourselves believe that technology had empowered and liberated world economic growth. We now know that economic growth, stimulated by the new technologies, only fosters much greater demand for oil.

Yet if this taxi driver could see so clearly the link between oil and globalization, one needs to ask why the Bush administration, made up of so many former oil executives, has not seen the same. Why hasn't the need for energy diversification become a major national security issue for this administration? The taxi driver correctly reasoned that the economic growth of China would cause the price of oil to soar, but of course what he did not know at the time was that the miscalculations of the Iraq war would be the catalyst for this increase.

The Bush administration has been accused of fomenting the war in Iraq in order to secure Iraq's oil. The accusation is based on the logical assumption that an administration rooted deep in the Texas oil fields would naturally follow the historical pattern of the British, when they played the Middle East oil game in the early 20th century.

The Bush foreign policy appears, however, not to be based on a Churchillian view of the world but on an odd pairing of Wilsonian idealism and traditional Republican isolationism. Possibly there was someone in the White House arguing the case for oil, but it is now apparent that the administration was basically honest in its simplistic goals in Iraq: to undo evil and create democracy in the Middle East.

If there was an underlying reason for the war, it was to demonstrate to the world that America was not a sleeping giant but would use its power when it thought it should. The pragmatics of oil was at best a third consideration.

Even if ideology was the prime mover for the war in Iraq, it is astonishing that this administration would fail to inherently understand the link between chaos in the Arab world and our economy. President Bush, a second-generation oil man, seems to have purposely disconnected the dots between America's dependency on Middle Eastern oil and radical Muslim fundamentalism. The efforts to find new energy suppliers or resources have been, at best, spin.

Energy relations with Russia are a prime example. Within hours after the collapse of the World Trade Center, Russian President Vladimir V. Putin called the White House to offer support. He understood perfectly, albeit self-servingly, that, hand-in-hand with the war on terrorism, America's main national security imperative would be to diversify its sources of energy. Mr. Putin let it be known that Russia, with its huge oil and gas reserves, was ready to become a reliable partner.

Now, more than three years later, with the price of oil hovering at all-time highs, the Bush administration's "energy dialogue" and "energy summits" with Russia have produced no significant deals. For the first eight months of this year, the United States imported an average of 256,000 barrels of Russian crude a day while the total average imports were 12.8 million barrels a day. That's less than 2 percent of total U.S. oil imports.

In an administration so concerned with national security, the failure to make an energy deal with Russia or plan for other alternative supplies is irresponsible. The logic of the taxi driver holds true: Oil is the Achilles' heal of globalization. And our economic well-being and security depend on a regular and consistent supply.

Edward Goldberg, president of a New York-based consulting firm, advises companies conducting business in Russia.

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