Are recent oil price hikes a conscious effort by the Organization of Petroleum Exporting Countries to hurt President George W. Bush’s election chances?
This question is a topic of comment in other countries, but has received little, if any, attention in the U.S. news media. If true, the price increases represent a new chapter in the history of how economics intersects with elections.
I first encountered a commentator’s assertion that “OPEC is betting George Bush won’t be elected with $2 gasoline” about two weeks ago in an Argentine daily and since have read similar comments in Brazilian papers.
Speculation about OPEC’s motives for cutting output recently is easy. Proof of intent is difficult. Nevertheless, it is hard to think of an OPEC member government other than Kuwait that would prefer Bush to a less truculent alternative. Wealthy, resource-based regimes like stability. Bush likes to rock the boat.
Moreover, regimes or populations in several OPEC member countries — Venezuela, Algeria, Iran and Indonesia — are clearly hostile to the Bush administration. Cutting production to raise U.S. gasoline prices in the election run-up is plausible. It would explain why production cuts came even when prices already were well above OPEC targets.
Indeed, the first OPEC embargo was largely a reaction by its Arab members against Israel’s humiliation of Egypt and Syria in the 1973 war. OPEC came about for a mix of political and economic reasons, but the foreign policy objectives of its major members certainly affect its policies.
Use of economic muscle to influence elections in other countries is nothing new. Usually, however, action is more direct and covert. The United States secretly funneled money to conservative political parties in Europe and Latin America from the 1950s into the 1970s. It also openly channeled federal money to anti-communist labor unions abroad through the AFL-CIO’s American Institute for Free Labor Development.
The Soviet Union covertly funded left-wing political parties and other groups around the globe for more than 70 years. Both super powers funneled foreign aid to regimes they wished to keep in power and withheld it from those they wished to fall.
Foreign countries have tried to influence U.S. elections, but never have used an economic weapon because our economy is so large. In 1980, the group holding Americans hostage in Iran openly delayed their release to ensure then-President Jimmy Carter’s failure in the 1980 elections.
Driving up oil prices to hurt an incumbent would be a new development. Rational OPEC countries such as Saudi Arabia know that unduly raising prices hurts OPEC’s already falling market share and the present value of many members’ oil reserves. There has to be some important reason they are acquiescent in recent price increases. Historians will eventually tell us whether U.S. electoral considerations played a role.
© 2004 Edward Lotterman
Chanarambie Consulting, Inc.