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Editorial: High oil prices threaten economy and Bush's chances for
second term

Last week's increase in the price of a barrel of oil to nearly $50 a
barrel underscores America's need for both a short-term and long-term
energy policy.

Oil industry experts differ on whether oil prices and gasoline prices
will stay high over the short-term but there is little disagreement on
the long-term pictu As income levels rise for the billions of
people in developing nations such as China and India, oil is going to
become a scarcer and more expensive commodity.

"In the long run, I seriously doubt that there is enough oil on the
planet Earth to meet the needs of all of us driving SUVs, not just in
America but also in China and India," Dr. Edward Yardeni, noted
economist for Prudential Equity Group wrote on his Web site last week.
"Imagine the adverse environmental impact of all those folks driving
their children's soccer and rugby teams from game to game. You don't
have to believe in Global Warming now to believe that it might be a
big problem if the number of cars in our planet double or triple in
the next 20 or 30 years."

In the short term, the skyrocketing price of oil poses the real threat
of throwing the U.S. and global economy back into recession. To avoid
that, Yardeni proposes that the Bush administration begin selling
enough oil from the 666 million barrels held in the nation's Strategic
Petroleum Reserve (SPR) to cap the price at $40 a barrel - low enough
to prevent a recession but high enough to force the passage of a
comprehensive energy policy.

The economist proposes that the government use the profits from its
sale of SPR oil (which he estimates at $29 billion) to create
incentives to develop more domestic sources of gas and oil, to develop
alternative energy sources, to create new technologies that increase
energy efficiency, to develop new technologies that don't require oil
and to conserve.

Of course, Yardeni isn't saying anything that hasn't been said before
and ignored by presidents and Congresses of both parties for decades.
But if gasoline prices continue to hold at around the $2 a gallon
level and go even in higher in the years to come, the nation's leaders
may no longer be able to sweep the issue under the rug.

Certainly if President Bush were to begin releasing the nation's oil
reserves now, it would be criticized as a political gesture to try to
bring gas prices down before the election. On the other hand, if he
doesn't do something soon about high oil prices and the U.S. economy
sinks back into recession, he won't have a snowball's chance of
getting re-elected anyway.