Dan Rather
LIGHT, SWEET crude for May delivery - sounds almost poetic, doesn't it? Well, at more than $71 a barrel, you might expect something more than the merely prosaic black stuff that is shipped to refineries and ends up in your gas tank. Of course, oil is not poetry, even at these prices. But like a poem, the price of oil has many possible meanings and interpretations.
When oil prices hit record highs, as they did last week (though not, it should be noted, when adjusted for inflation), the first interpretation that most Americans will be looking for is an economic one. As in, how did this happen? And what will it mean for my pocketbook down the road? For the answer to the first question, consumers can, in part, look in the mirror. Among the proximate causes for last week's price spikes - the most dramatic since Hurricane Katrina's effect on Gulf Coast refining capacity - were unexpectedly low gas and crude inventories. In other words, we've been using more gas than expected, and now it's costing us.
When demand outstrips supply, Economics 101 tells us that prices will go up. But are the supplies really that low, or is this more about that key word, 'expectations,' concerning supply and demand on world markets? With investors turning increasingly toward commodities - such as oil, silver and gold - instead of stocks, there's a lot of evidence to suggest that speculation is a big part of the soaring prices. And with the summer driving season still looming, you can probably expect to keep taking hits in the wallet as expectations for demand rise with the temperature.
SEEKING INTERPRETATIONS
Meantime, those who speculate on the price of oil are also looking for interpretations on a global scale. American consumption, which leads the pack with a quarter of the world's total, surely factors into this. But so does the increasing competition for limited oil resources from No. two on the list, China. And so does the fear that the nuclear ambitions of Iran, home to 10 per cent of global oil reserves, will lead to military action by the United States. Add instability in oil producers Nigeria and Iraq to the mix, and it's little wonder that investors are betting up oil prices.
And then there's the political meaning of these high oil prices. Here in the U.S., the looming midterm elections have the Republican-controlled Congress and its political allies in the White House understandably nervous. For an administration so heavily identified with the oil industry, news that the chairman of Exxon will be receiving a retirement package valued at nearly $400 million could not have come at a less opportune time. The backlash against huge oil company profits while Americans are taking a beating at the pump may lead to oil executives being called yet again before Congress, but it seems unlikely that any real relief for consumers would come from such an action.
On the one hand, oil is just something pumped out of the ground. And on the other, it is the thing on which so much now turns, both within and outside our American borders. Its prices inspire fears of global economic slowdown among the leadership of the International Monetary Fund. Its emissions cause environmentalists to raise the alarm about global warming. The profits it brings to unfriendly regimes may even help to fund our enemies in the war on terrorism. So many interpretations for why oil prices go up, and so many possible things the rising prices can mean. And through it all, Americans continue to buy gas-guzzling cars and drive as if the words "light sweet crude" really were poetry to our ears.
Dan Rather is an American television broadcaster.
