President Bush is concerned rising oil prices could delay the U.S. economic recovery and is considering a range of options, including tapping oil reserves, to keep the recovery on course.
President Bush told The Wall Street Journal that Iraq's decision to halt oil exports for 30 days, in protest against Israel's on-going military activity in the Palestinian territories, is one reason why he believes the potential for what he calls an oil shock remains. It is also why he says it would not be smart to make bold predictions right now about the American economy.
In his first reaction to the Iraqi move, the President says he would consider all options, including drilling in the Alaska arctic refuge, if a spike in oil prices threatened the U.S. economy's recovery from recession. Americans are currently paying sharply higher prices at the gasoline pumps and Iraq's threat to use oil as a weapon sent world oil prices soaring from what were already sharp highs.
But Lawrence Goldstein, president of the Petroleum Industry Research Foundation, believes the United States is no longer as vulnerable to oil shocks as it was during the Arab oil embargo 30 years ago. "In 1973, the Arab embargo forced the U.S. into a recession. In 1980, the Iran-Iraq war forced the U.S. into a recession," he said. "In 1990, when Iraq invaded Kuwait, the U.S. went into a recession. But it's unlikely that $30 oil will force the U.S. into a recession because one of the things the U.S. quietly has done is to reduce the importance of oil directly in the U.S. economy. With growth taking place outside the oil sector, the service sector, we've seen a more than halving the importance of oil to U.S. GDP."
On Tuesday, a day after Iraq suspended oil exports, workers at Venezuela's state-owned oil company went on strike, in a dispute with the government. A prolonged labor walkout in Venezuela could have a much larger impact on the U.S. economy, since the South American country is the third largest crude oil exporter to the United States.