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The addict and pusher

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    Fw: [fuelcell-energy] ... The addict and pusher Published: February 3 2006 02:00 | Last updated: February 3 2006 02:00 President George W. Bush has called on
    Message 1 of 1 , Feb 3 6:03 AM
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      Fw: [fuelcell-energy]
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      The addict and pusher
      Published: February 3 2006 02:00 | Last updated: February 3 2006 02:00

      President George W. Bush has called on America to kick its oil habit
      and its dependence on Middle East producers that form the heart of
      the Organisation of Petroleum Exporting Countries cartel. The latter
      has reacted by warning that Mr Bush's call could jeopardise
      investment in Gulf production. But this is just political grand-
      standing. Both sides know that, like a pair of drunks, they prop each
      other up.

      Several past US presidents have issued vain clarion calls for total
      oil independence. So Mr Bush has set an easier goal, a big cut in US
      imports of Middle East oil that account for only one-fifth of what
      the US buys abroad. Yet Arab oil supplies are more reliable than
      those from Nigeria or Venezuela.

      Mr Bush clearly chafes at any direct reliance on Arab oil, given his
      foreign policy ambitions in the region. But the hold that Middle East
      producers have over the US is related to their 40 per cent hold on
      the world oil market. As the world's largest oil consumer, the US has
      a keen interest in producers, especially Opec, moderating prices. To
      this end, it has actively encouraged non-Opec output in places such
      as the Caspian. But non-Opec production is declining relative to
      Opec's, though Canada's oil sands could one day redress this. In the
      end, however, Mr Bush will not succeed, because what he is really
      addicted to is supply-side solutions to a coming oil crunch that can
      only be solved with some real constraint on demand.

      For its part, Opec has over the years greatly benefited from the
      constant suction that US imports exert on the world oil market; this
      has been just as effective as the cartel's own production quotas in
      providing a floor price for oil. Mr Bush's words this week might
      reduce the willingness of Saudi Arabia, Opec's biggest producer, to
      hold some capacity idle in order to deal with demand surges. Yet it
      is this spare capacity that cements Saudi dominance over the cartel,
      a card that Riyadh would not lightly surrender. In addition, Middle
      East members of Opec can hardly complain of Mr Bush discouraging
      investment when several of them impose their own barriers to foreign
      investment. Companies such as Shell and ExxonMobil would be happy to
      sink some of the record profits they reported in the past week into
      extracting the Arabian peninsula's easy oil.

      No one outside the US should underestimate the enormous difficulty of
      kicking the oil habit in a country whose cities, suburbs and extended
      ex-urbs are built entirely around the motor car. But if Mr Bush had
      this week really wanted America to start to kick its addition, he
      would have announced the US was dropping its joint opposition with
      Opec to the Kyoto treaty, adopting a carbon tax through emissions
      trading and imposing a serious tax on gasoline. This would provide
      the necessary incentives for alternative fuels, and bring in oil tax
      revenue that otherwise ends in Opec's pockets.




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