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 he
chart above represents average annual domestic first-purchase prices per
barrel of oil, expressed in inflation-adjusted terms, with all prices
in 2003 dollar values. There are two notable spikes associated with unrest
in the Gulf region:
1. Note the spike in the time leading up to and during
the first Gulf War crisis, which started in late 1990 and ended early
1991. This spike represents an increase in oil prices of $7.45 per barrel
from 1988 through 1990.
2. Note
the spike occurring now, in the midst of the Iraqi disarmament crisis.
This spike — from early 2002 to late February 2003 — represents
an increase in oil prices of $13.87 per barrel.
Oil is unusually
volatile compared to other commodities; that is, it is particularly susceptible
to certain political forces. And it is most susceptible to the international
factors that would appear to make oil production and refinement more difficult
— and therefore more scarce. Yet, despite dire warnings that permanently
high prices would result from anti-American sentiment accompanying the
first Gulf War, the 1990s turned out to be a decade of low-cost oil. Ultimately
supply-side forces come into play and drive oil prices downward (like
most commodities in a growing economy).
If historical patterns
hold, the cut in the tax cost of capital which is likely to occur with
the passage of President Bush's economic package will be supplemented
by a “tax cut” in the cost of industrial production and transportation
in the form of lower oil prices following the Iraqi crisis.
—
Jerry Bowyer is a talk show host on WPTT radio in Pittsburgh, Pennsylvania.
He can be reached through www.BowyerMedia.com.
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