The link to this interview with Stiglitz was posted before on LBO. I think his observations on the price of oil and which faction of the U.S. ruling class high prices benefit, might shed some light on the issue of this leak. After all, oil prices did jump, from what $60 a barrel to $70, after the stories came out.
I also think the fear factor card is being played here--what used to be known as "brinkmanship". In any event, I know that I'm afraid of the fools in charge of nuclear weapons whatever the name of their State may be.
Regards, Mike B)
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SPIEGEL: Before the invasion of Iraq, the US administration said the best way to keep oil prices in check is a short and successful war. A barrel was at $25 at that time, and now it's over $60. What of this increase is due to Iraq? Stiglitz: In our analysis about the cost of war, we only assumed a modest $5 to $10 caused by the war. We wanted to keep our study conservative, so no one would dispute our numbers, and no one did. But I believe that's a vast underestimation of the true cost. SPIEGEL: But why? China and India are increasing their demand, real global growth has been going on. This is driving the prices. Stiglitz: When demand rises so does supply -- that's how markets usually work. Now we're seeing that demand for oil is rising but we're not getting a commensurate increase in supply. And there's a simple answer, it's Iraq. But it's not just because it production has been down. SPIEGEL: Why else? Stiglitz: The Middle East is the lowest cost producer in the world. They can produce oil for $10, $15 or $20 a barrel. Now we have the technology to produce oil elsewhere for $35 to $45. But who wants to develop fields or invest in new technologies elsewhere if they know that in five years' time, the Middle East may be supplying oil at previous prices? SPIEGEL: In other words, were peace and stability re-established in the Middle East, the oil price would be back to maybe $25, despite the huge global hunger for energy? Stiglitz: Yes. By the way that's the price level oil traders were speculating on in futures trading before the outbreak of war. Stiglitz: The only people benefiting in this war are Bush's friends in the oil industry. He has done the American economy and the global economy an enormous disfavor, but his Texan friends couldn't be happier. The price of oil is up, and they make money when the price of oil goes up. Their profits are at record levels. SPIEGEL: You don't like this president very much. Stiglitz: Oh, it's nothing personal. It's all about his politics. SPIEGEL: There is an old saying: War is good for the economy. Stiglitz: Listen, World War II was really unusual, because America was in the Great Depression before. So the war did help the US economy to get securely out of this decline. This time, the war is bad for the economy in both the short and long run. We could have spent trillions in research or education instead. This would have led to future productivity increases. SPIEGEL: So is the economical mess of the Iraq war even bigger than the political? Stiglitz: Well, we are so rich, we are able to withstand even this level. Crowding out other investments, weakening the economy in the future, that's not a crisis yet. But it's an erosion. It becomes an issue for our legislators. And don't forget the serious issues of nuclear proliferation in Iran and North Korea. We used up our ability to deal with something serious by dealing with something that was less serious. SPIEGEL: What's your economic view on Iran? Stiglitz: We are helping the people that Bush says are evil. Teheran couldn't be happier about the high oil prices resulting from the Iraq war. SPIEGEL: If the UN Security Council votes for sanctions over Iran and its oil exports, what would that mean for the world economy? Stiglitz: It would mean an enormous disruption, as oil prices might rise over $100. You can increase the price from $25 to $40, and people can absorb it. If the price rises above $60, they become unhappy. They start to adjust, they move to smaller cars, drive a little bit less. At $100 or $120, there are major changes in lifestyle. The sales of cars will plummet. Poor people will be facing real problems of heat versus food. SPIEGEL: The world can't afford sanctions at this time? Stiglitz: We talk about not allowing their officials to get visas to visit our countries.
full: SPIEGEL ONLINE - April 5, 2006, 10:06 AMURL: http://www.spiegel.de/international/spiegel/0,1518,409710,00.html
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