2004 April 20 Tuesday
Do Saudis Manipulate Oil Prices Before Presidential Elections?

Bob Woodward sure knows how to promote a book. Woodward's latest book Plan Of Attack on the Bush Administration decision-making that led up to the invasion of Iraq has enough salacious claims about major players to guarantee a fair amount of controversy and free media coverage. You can read excerpts from the book in a Washington Post series. The biggest flap about the book so far is over whether the Saudis promised to lower oil prices to help reelect George W. Bush.

``Bandar wanted Bush to know that the Saudis hope to fine-tune oil prices to prime the economy in 2004,'' Woodward wrote. ``What was key, Bandar understood, were the economic conditions before a presidential election.''

The Saudis are predictably denying this supposed deal.

``The allegation that the kingdom is manipulating the price of oil for political purposes or to affect elections is erroneous and has no basis in fact,'' said a statement issued in Riyadh by top Saudi foreign policy adviser Adel al-Jubeir.

Bandar says Carter asked for lower oil prices for the 1980 election and Clinton did for the 2000 election.

"President Clinton asked us to keep the prices down in the year 2000," Bin Sultan told CNN's "Larry King Live,"

Bandar's claim seems highly plausible. Presidents would have plenty of incentive to ask the Saudis for lower prices before elections. But don't tell that to John Kerry. He is most upset.

"If it is true that gas supplies and prices in America are tied to the American election, tied to a secret White House deal, that is outrageous and unacceptable to the American people," Kerry said.

Hey, if it is standard practice for the Saudis to lower prices before US Presidential elections then maybe we should amend the constitution to reelect presidents yearly. Think of all the money we'd save.

Given that the price of oil is now at about $35 per barrel if the Saudis have a plan to help Bush it must be a pretty weird plan. A decline in oil prices of, say, $10 per barrel would take a while to filter down to gas station prices and lower oil prices would take a while to boost the economy. Bush needs a robust economy with declining unemployment most of all. Current Saudi oil production levels are therefore not helping Bush to be reelected.

Prince Bandar probably does not have the power within the Saudi government to engineer a big increase in oil production. The faction he is a part of is opposed by another more religiously fundamentalist faction in the Saudi royal family that views the United States with considerable hostility. The opposing faction may well see high oil prices as desirable because they may prefer Bush to be defeated.

Some people are reacting to this quote from Woodward scandalized by the very idea of the Saudi ambassador seeming to intervene in American politics by lowering the world price of oil in order to help a sitting US President get reelected. But even if this is true (and, again, I have my doubts given Saudi internal politics) the emphasis on the possibility of unethical secret deals and undue influence misses the most important point: Saudi Arabia's role as swing producer for oil and possession of oil reserves that are widely believed to represent a quarter of the world's oil reserves give Saudi Arabia's government enormous influence. The Saudis could just as easily drive up the world price of oil in order to prevent a sitting US President from getting reelected. For all we know the Saudis might secretly be intending just that outcome while pretending to Bush that they intend to drive the price of oil down.

My point here is that the bigger problem is world reliance on a corrupt oppressive theocratic state for what is currently the most important natural resource for the world economy. The time spent venting about undue influence oil reserves give Saudi Arabia over American politics ought to be more productively directed toward arguing for a massive research and development effort aimed at obsolescing oil as the primary energy source for the world's economy.

If any of readers think the Saudi royal family is lined up united for a George W. Bush reelection see my previous post Michael Scott Doran: The Saudi Paradox for a more nuanced view of internal Saudi politics.

For arguments on why and how we could launch a huge effort to accelerate the development of technologies to obsolesce oil see my previous posts Intervention In Liberia Linked To Oil Dependency, China Energy Consumption Growth Complicates Anti-Terrorist Efforts, Luft And Korin On China's Rising Demand For Oil And Saudi Arabia, and Energy Policy, Islamic Terrorism, And Grand Strategy.

Share |      By Randall Parker at 2004 April 20 12:37 PM  Politics Grand Strategy

superfly said at April 20, 2004 7:40 PM:

"The Saudi War on George Bush"

"Saudi Arabia has launched an undeclared war on George W. Bush. This simple fact must be understood by policy and strategy elites, the press, and the general electorate. Otherwise, the Saudis may well succeed in their tacit campaign to sabotage the long term success of America’s war on terror, by engineering the electoral defeat of George W. Bush in November."

Randall Parker said at April 20, 2004 9:23 PM:

Superfly, Thanks for the link. I recall reading that article but couldn't find it again when writing this post. So I appreciate your passing it along.

I really do not see how the Saudis are behaving now that can be construed as aimed at bolstering Bush. The current high price for oil and recent Saudi lobbying of other OPEC producers for a reduction in production argue against the idea that the Saudis who actually have decision-making power on oil production want Bush to be reelected.

Sean said at April 20, 2004 9:30 PM:

To hell with them - let's just invade! We owe them for the mid-70's embargo...

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