IASPS Op-Eds
Comments on the Decline of the Nation-State
March 9, 2000
The End of the Oil Era and the Price of Oil
by IASPS Staff, Division for Strategic Studies
The present rise in the price of oil has obscured the two fundamental facts about this commodity. The first of these fundamental facts is the oil era is over. This Institute's Caspian Project was actually the first to announce this change almost three years ago. Today, in the midst of the price rise, commentators of all political persuasions have come to accept this point. For example, The New York Times calls the end of the oil era "the conventional wisdom," and the Wall Street Journal has recently editorialized in the same vein.
The second fundamental fact about oil, one the Institute also announced from the start, is that oil prices will fluctuate for as long as it takes policy makers, mainly in the US, to come to terms with what the end of the oil era means. In fact, the present price rise has now awakened them, triggered by Washington's policy makers mostly fearing to come to terms with a world glut of oil. An example of this is the unprecedented outburst of congressional anger at Saudi-led price fixing. Noting that oil would be plentiful in market conditions, Congressmen Gilman, Rohrabacher and others spoke the unspeakable: Why are we coddling OPEC and its allies?
To the shock and embarrassment of Washington's community of deference to Persian Gulf producers, Congressmen insisted that the political manipulation of US and world oil consumption come to an end.
In our view at IASPS, this is what coming to terms with the oil price means --namely taking steps to bring market reform to the production and sale of oil. The Gilman hearings of this past month are a step in the direction of reform of this kind. Readers of this website know there is another Gulf.
Our conventional wisdom at IASPS is that the present non-market based price rise of oil will turn many heads in Washington to the Gulf of Guinea off western Africa. When that happen, perhaps beginning on November 5 of this year no matter who wins the presidency, price fixing as we are still seeing it today will not be an option.