Next week, Edward Morse will answer reader questions about the price of oil and what it means for oil-producing states and U.S. foreign policy.Submit a question
EDWARD L. MORSE is Managing Director of Louis Capital Markets. He was Deputy Assistant Secretary of State for International Energy Policy in 1979-81.
Despite common assumptions, oil prices are likely to remain low for a while: key producers, especially Saudi Arabia, have been boosting their production, and demand growth in top consumers like the United States and China will be more modest than expected.
The United States recently "discovered" Mexico. Potential oil reserves of 200 billion barrels helped focus our attention and sparked interest in forging some kind of special relationship with our southern neighbor. Concrete proposals range from a North American Accord or Common Market to less dramatic package deals that would swap petroleum for increased Mexican access to U.S. markets.
Alaskan politicians have used every oil-price rise since 1973 to push for drilling beneath the Arctic National Wildlife Refuge. But even putting environmental questions aside, refuge oil is unnecessary, insecure, economically risky, and a distraction from the real energy debate. Market solutions that enhance efficiency can provide secure, safe, and clean energy services at much lower cost.
Iran, in the view of Shah Mohammed Reza Pahlavi, has a great imperial past and a greater imperial future. In the next few years it is to assert its dominant role in the Persian Gulf region and the nearby reaches of the Indian Ocean. By 1990 it will attain the status of a Britain or a France in the global hierarchy of powers. Seeing this dream of the future, the Shah is already acting as if it were reality. Meanwhile, his neighbor across the Gulf, Saudi Arabia, talks less of empire but gradually extends its influence through the Arab world. Sheikh Ahmed Zaki Yamani, the Saudi Minister of Oil and Industry, can virtually dictate the world price of oil as long as he speaks for his king. He can lead the Organization of Petroleum Exporting Countries (OPEC) or he can break it. He can please the Americans by being "moderate" on the oil price, and at the same time can remind them that he expects them to move Israel toward a settlement acceptable to the Arabs. The United States worries about its rising imports of oil, which increase its vulnerability to the decisions of OPEC, but takes comfort in the fact that it has a friend in Riyadh.
Washington's repeated attempts to bring peace to Somalia with state-building initiatives have failed, even backfired. It should renounce political intervention and encourage local development without trying to improve governance.
