Loose Canons

Eurotalk, Oil, and China

The price of oil threatens our economic well-being. What are we going to do about it?

By 2.28.05

Send to Kindle

Like yesterday, snowy days in Washington are when the weather wimps shut things down, people call in sick, and only the mailman is out enjoying the weather that displays our capital city's beauty best. Though February 28 won't be remembered longer than it takes to shovel out the snowfall, it was a benchmark day against which the rest of the year should be measured. Politically and militarily, but not economically, events are turning in America's favor.

Put whatever caveats on this as you'd like, but today we are winning the war against Islamist terrorists and the nations that support them. As Churchill said after the 1942 victory at El Alamein, this is not the end, or even the beginning of the end of this war. But it may well be the end of the beginning. As many times as the left may bleat that Iraq is George Bush's Vietnam, Iraq today is just what the President said it would be: a beachhead for democracy in the Arab Middle East. The Iraq election is only a month past, and now there are street demonstrations against Hosni Mubarak's Egyptian despotism, and in Lebanon the yoke of Syrian oppression is becoming too heavy. Syria, which overplayed its hand by assassinating former Lebanese prime minister Harriri is under pressure to remove its troops from Lebanon and to end its open support for every Islamic terrorist organization. Even Kofi Annan and Jacques Chirac are at least giving lip service to the idea. Crowds flooding the streets of Beirut aren't protesting America or Israel: they're protesting Syrian occupation.

The Middle Eastern despotisms are under considerable pressure, and they will survive it for some time, but that time grows shorter. While the Iraq democracy functions, all the neighboring despotisms and dictatorships -- including the Iranian kakistocracy -- are threatened. They will become more and more desperate, and reckless, in trying to stanch the flow of freedom into their region. They will do their best to raise the price of our success in blood and treasure. They will raise the cost, as will events that have nothing to do with the war and everything to do with the economy of the world's most populous nation.

THERE IS ELATION IN Europe, even in Britain, at the perception of a diminished America. America is weaker than we were before 9-11 or before the Iraq campaign. The dollar's value is too low, the price of oil is astronomical and still rising, and the war is costing us considerable blood and treasure. And the EUnuchs are quite happy about it all, even though the oil problem hurts them as much or more than it hurts us. The weak dollar isn't even the main reason for the rise in oil prices: it's just that demand is skyrocketing and the supply isn't following suit.

America imports more than eight million barrels of oil every day from nations such as Saudi Arabia, Canada, Mexico, Venezuela and Nigeria. Our trade deficit last year -- about $1.1 trillion -- is roughly equal to the price of imported oil. To the extent we can diminish oil imports, our economy rebounds. The price of oil, now over $50 per barrel, will remain high for a long time to come, and not just because the OPEC nations want it to.

China has doubled its oil imports over the last five years and increased oil imports by almost 40% in 2004. China's GDP rose almost ten percent last year, and -- according to a Time magazine report -- about 2.5 million more cars will be on Chinese roads this year alone. Chinese economic expansion will keep oil prices high, and the dollar weak. It is long past time for us to open ANWR, reinvigorate offshore drilling, and to make nuclear power what it must be if our economy is to continue to grow: a common and reliable source of energy. We can push the price of energy down domestically, and let the rest of the world market function as it should, freely and to the economic detriment of Europe.

The European celebration is mis-timed. Yes, the dollar is weak, but the euro is artificially high. Because the price of oil is pegged to the dollar, not the euro, the oil price burden on European economies is proportionally higher than it is on ours. And at the same time that Chevrolet is building a car factory in Shandong Province, China, France is suffering a five-year high unemployment rate of ten percent. The EUnuchs want to compete with us economically. And they choose to do so by increasing our need for defense spending while profiting from arms sales.

AS PRESIDENT BUSH LAST week tried to dissuade them from doing, Europe means to lift the leaky arms embargo against China. Europe's response has been much like its response to the President's renewed request for help in Iraq. When France promised to send a single officer to help train Iraqis, it answered the President's request with contempt. Mr. Bush went to Europe seeking reconciliation and failed. As George Melloan wrote in the Wall Street Journal last week, Europe regards the burden of reconciliation to be ours and ours alone. So long as it is -- and I saw no hint to the contrary from the leaders Mr. Bush met with last week -- reconciliation efforts are doomed to failure. There is no flexibility or change in the European positions on the Iraq war, Iran, China, or anything else of importance.

So far, there has been little more than bad feeling between us and Europe. Jokes and mini-embargos of French products amuse, but do not really damage. If there is no change in the European positions now taken, and the policies now being pursued, there will be more than just hurt feelings. There may be a trade war over subsidized Airbus's competition against Boeing, technology sanctions as a result of European selling of arms to China, and worse. When you have usually moderate senators such as Richard Lugar threatening technology sanctions over the China arms sales as he did last week, I gauge the political situation here to be approaching a watershed. American politics are changing in as fundamental a way as they did in the 1930s. Europe fails to understand this at its peril. And ours.

TAS contributing editor Jed Babbin is the author of Inside the Asylum: Why the UN and Old Europe Are Worse Than You Think (Regnery, 2004).

Like this Article

Print this Article

Print Article
About the Author
Jed Babbin served as a Deputy Undersecretary of Defense under George H.W. Bush. He is the author of several bestselling books including Inside the Asylum and In the Words of Our Enemies. He is coauthor (with Herbert London) of the new book The BDS War Against Israel. You can follow him on Twitter@jedbabbin.