VicePpreident Bush has got himself well and truly entangled in the oil-price dilemma. While it is Mr. Bush's entanglement that has mainly attracted notice, the dilemma is genuine, and it also deserves attention. Mr. Bush's present embarrassments arise from his attempts to placate simultaneously two different constituencies, one of them at the White House and the other in Texas. He wants them both to know that his commitment to the principle of the free market is total -- up to a point.
After his talks in Saudi Arabia over the past several days, Mr. Bush tried to explain where the contention lies. The Saudis want the highest possible prices for oil, he said, while in contrast the United States wants "the lowest possible prices consistent with the fact that we need a strog domestic oil industry for our national security." First of all, the Saudis have been pushing oil prices down, not up. But the other half of his sentence is more interesting. What's the lowest price consistent with national security -- and how is it going to be enforced? That's the dilemma.
Mr. Bush went on to compound the confusion by affirming that it's all best left to the market. But the market now has the price down around $10 a barrel, compared with $26 at the beginning of this year.
Oil has a prominent place on the list of commodities -- steel is another, and wheat is a third -- that have implications for security and the stability of the economy. American oil is much more expensive to produce than, say, Saudi oil. Labor costs have little to do with it. The reason is geology, and the history of the fields. The great American fields, with the single exception of Alaska's North Slope, have been in production for a half-century and more. As production continues, the process of coaxing the oil out of the rock gets progressively more difficult and more demanding. But the Saudi fields have been in production hardly half as long. They are the largest in the world, by a huge margin, and lie conveniently close to the surface. The Saudi wells would remain handsomely profitable at prices that pushed most American producers out of business altogether.
Pure market theory counsels you to buy your oil at the lowest price offered, regardless of source. But even convinced free traders -- like, most of the time, ourselves -- wince at the prospect of rapidly rising imports of Middle Eastern oil. It's not as though this country had not had plenty of experience with that option over the past dozen years. Speaking of costs, that turned out to be pretty costly, too. However awkwardly, Mr. Bush is struggling with a real question. This country has no inclination whatever to repeat its previous unhappy experiments with oil import quotas and price fixing. But a steadily increasing dependence on imported oil is, as the man suggests, not a happy prospect.