(OPE-L) the price of oil and the political business cycle

From: Gerald A. Levy (Gerald_A_Levy@MSN.COM)
Date: Sun Apr 18 2004 - 21:16:03 EDT


Tonight's episode on CBS of "60 Minutes" had an
interview with the journalist Bob Woodward about
his new book _Plan of Attack_.   Woodward interviewed
75 government officials, including President Bush, about
the internal decision-making within the Bush administration
in the months prior to the launching of the war against
Iraq.

In the interview,  Woodward describes how Bush
administration officials told Prince Bandar, Saudi ambassador
to the U.S., about the decision and plans to go to war --
two days before Colin Powell was told by Bush that he
had decided to go to war!  The story goes on to claim
that Bandar's family and the Bush family are close.

The story continued:

"Bandar has promised the president that Saudi Arabia
will lower oil prices in the months before the election
-- to ensure the U.S. economy is strong on election day.

Woodward said that Bandar understood that economic
conditions were key before a presidential election: 'They're
[oil prices] high. And they could go down very quickly.
That's the Saudi pledge. Certainly over the summer, or as
we get closer to the election,  they could increase production
several million barrels a day and the price would drop
significantly'."

Full story:
http://www.cbsnews.com/stories/2004/04/15/60minutes/main612067.shtml

===================================

Now here's my question, for Cyrus and/or whoever knows
something about this topic:

If it is true, as Cyrus claims, that oil prices are now competitively
determined on world markets, how is it that Saudi Arabia -- acting
alone -- can cause a significant drop in the price of oil and gas?

This suggests a level of market power that shouldn't be present in
a more competitive market, doesn't it?

On another matter, it strikes me as somewhat naive on the part
of the Bush administration to believe that if oil prices go down then
the economy will prosper which will then ensure Bush a win in
November.    But, maybe they just see it as one component in
a larger election campaign plan.

In seeking to get Bush re-elected,  what exactly would the Saudi
Arabian government and royal family gain?  I wonder. It would
seem to me that too close an association with the Bush administration
is a very risky strategy for the Saudi royal family.

In solidarity, Jerry


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