Tuesday, June 17, 2008

The sheer hypocrisy of this debate on oil

Oil makes hypocrites of us all. Ban Ki-moon, the UN secretary general who last year took office declaring that his main goal was to fight "man-made climate change", has spent most of his weekend in Jeddah attempting to persuade King Abdullah of Saudi Arabia to ramp up the kingdom's oil production.

This is just the global edition of Gordon Brown's earlier plea to the Saudis to "do something" about the high price of oil; a remarkable display of diplomatic chutzpah from a man who, as Chancellor, spent a decade telling us that increasing the price of petrol on British forecourts through fiscal means was very much in the best interests of the whole planet.

Meanwhile the US Senate has threatened to launch a prosecution of OPEC for its alleged fixing of the world oil market, to the detriment of the American consumer. The American legislature's hypocrisy in this matter takes a different form to ours: the politicians who are now howling with rage about the shortage of oil supply are in essence the same people who have long blocked the oil industry from developing vast deposits both in the Arctic National Wildlife Refuge and off their own coastline – about 80 per cent of the US continental shelf is out of bounds, on environmental grounds.

I imagine that when King Abdullah told Mr Ban that "national policies in the West" were partly to blame for the current very high price of crude oil, the Americans' refusal to drill for oil in their own most geologically promising territories might have been one of the factors he had in mind.

Ban Ki-moon was not, needless to say, acting solely as an emissary for the United States: he was representing the teeming billions in nations as diverse as China, India and Malaysia. Yet if you look at this seizure in the oil market from the point of view of demand, rather than supply, then these same countries have also contributed directly to the problem they have asked Mr Ban to sort out for them.

All have for years had a policy of subsidising the price paid by their consumers and industry for oil products – and on a vast scale. According to the head of the International Energy Agency, Nobuo Tanaka, such subsidies are currently running at a rate of about one hundred billion dollars a year. In other words, these countries' biggest energy consumers are being shielded from the effects of high oil prices, and therefore are not adjusting their consumption downwards – quite the reverse, in fact.

This morning's commentary in the Independent.