The Oil Crunch PAUL KRUGMAN

[MSgt213]

Before the start of the Iraq war his media empire did so much to promote, Rupert Murdoch explained the payoff: "The greatest thing to come out of this for the world economy, if you could put it that way, would be $20 a barrel for oil." Crude oil prices in New York rose to almost $40 a barrel yesterday, a 13-year high.

Those who expected big economic benefits from the war were, of course, utterly wrong about how things would go in Iraq. But the disastrous occupation is only part of the reason that oil is getting more expensive; the other, which will last even if we somehow find a way out of the quagmire, is the intensifying competition for a limited world oil supply.

Thanks to the mess in Iraq — including a continuing campaign of sabotage against oil pipelines — oil exports have yet to recover to their prewar level, let alone supply the millions of extra barrels each day the optimists imagined. And the fallout from the war has spooked the markets, which now fear terrorist attacks on oil installations in Saudi Arabia, and are starting to worry about radicalization throughout the Middle East. (It has been interesting to watch people who lauded George Bush's leadership in the war on terror come to the belated realization that Mr. Bush has given Osama bin Laden exactly what he wanted.)

Even if things had gone well, however, Iraq couldn't have given us cheap oil for more than a couple of years at most, because the United States and other advanced countries are now competing for oil with the surging economies of Asia.

http://www.nytimes.com/2004/05/07/opinion/07KRUG.html

[brokensymmetry]

1. Great article!

The book "Resource Wars" gives some insight into what comes next - China MUST maintain rapid growth to keep the population placid. And that means a need for oil (among other things) and lots of it.

The US and Western Europe also need lots of oil.

Does anyone else see the potential for a really nasty war?

[NewJeffCT]

2. I hope not

But, I can definitely see rising tensions coupled with intense economic pressure on the US from China, Japan and Europe to stop buying so many gas guzzling SUVs and to curb pollution.

We definitely need to invest in developing alternative energy sources and to improve fuel economy in existing cars (I thought I had heard earlier this year that within a year or two, Toyota & Honda will be introducing new cars with dramatically improved gas mileage...?)