Washington diary: Oil shock

By Matt Frei
BBC News, Washington

Remember those heady days of spring 2005, when the price of a barrel of light crude busted $50?

Petrol prices are rising in the US - but there have been no riots yet

It seemed like a historic milestone to somewhere unpleasant, but no-one was quite sure where.

Doomsayers with strong stomachs dared to look into a future. "What would happen if there was all out war with Iran?" they were asked.

Well, for one, oil could top $100 a barrel. Just imagine.

"Don't be absurd!" "Never! Not in your worst dreams!" That was the chorus of rebuttal from a phalanx of realists grounded in sound economics.

The doomsayers were indeed wrong.

On Monday, oil rose to $93 a barrel, only seven bucks short of its cataclysmic, futuristic high, and the world is still standing, we are not at war with Iran (yet) and there are no riots at my local petrol station.

Sanctions

What we do know is that every time President Mahmoud Ahmadinejad of Iran gets into a scrum with the US and Europe, he becomes more popular in Moscow and makes more money from oil.

The real shock about today's oil shock is that it isn't a shock Send us your comments

The sanctions announced by the US last week may indeed hurt Iran's Revolutionary Guard force and its real estate business but they have also helped to push the price of oil higher.

For now Iran is one of the biggest beneficiaries of the crisis it is helping to fuel, so to speak.

It is too early to tell when the pain of sanctions trumps the gain of higher oil prices.

And even then, it is hard to say whether sanctions will have the desired political effect.

Swagger of wealth

Oil is the poison in the diplomatic mix. The need to buy it means that energy-hungry giants like China will find another reason not to side with the US at the UN Security Council.

Russia and Iran have more sway because of their big oil reserves

The need to sell it means that countries like Venezuela and Russia can replace the stagger of poverty with the swagger of wealth without reforming their economies.

We are addicted to oil and so are they. The addict and the pusher are equally doomed.

Would President Hugo Chavez of Venezuela really refer to President George W Bush as "the devil" if he hadn't been the world's sixth largest exporter of oil last year?

Would Vladimir Putin describe the Bush administration as "running around like a madman with a razor blade" if he weren't making a mint from crude?

Would he enjoy a 75% popularity rating at home?

Towards the abyss

Last year Tom Friedman, the New York Times columnist, said he welcomed the doomsday scenario of $100 a barrel, because only this would provide the necessary shock treatment.

Venezuela's position as a big oil exporter helps Hugo Chavez

It would finally concentrate minds on the strategic price of oil, on the way oil distorts America's political interests, especially in the Middle East.

It would force us to develop alternative sources of fuel, which in turn would force the unelected Princes of Arabia to change their ways.

It would encourage us to change our lavish life styles, say goodbye to the Hummer once and for all and diminish our carbon footprint.

I hate to say it, Tom, but we're only a fistful of dollars short and the world continues to slide, even glide towards the abyss.

California burns, Georgia is dying of thirst, the Dominican Republic is drowning and I'm driving around in my beaten-up convertible with the roof down at the end of October in Washington DC.

Mother Nature is acting weird and virtually every scientist you speak to says it's not just a cyclical phase or a freakish fit but a fact of science, which should give us sleepless nights.

The Weather Channel is no longer just for climate geeks and it costs more and more to fill my car with petrol - and yet, the real shock about today's oil shock is that it isn't a shock. Yet.

Matt Frei is the presenter of BBC World News America, airing at 2300 GMT (1900 ET / 1600 PT) every weekday

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