TCS Daily

Slick Rhetoric

By Jerry Bowyer - October 13, 2004 12:00 AM

"That's the difference between us. The President sides with the power companies... the oil companies..."

- John Kerry

For some strange reason, oil companies attract more units of conspiracy mongering per BTU than any other industry. Before there were faceless HMOs, before there were heartless tobacco companies, before there were irresponsible gun manufacturers, there was Big Oil. Jimmy Carter singled out oil companies for special varieties of tax torture in the form of an anti windfall profits tax in the 1970s. Ignoramuses of Left and Right can effortlessly pawn themselves off as sophisticates in any discussion of events of the Middle-East or central Asia by simply declaring that "it's all about oil." Israel, Afghanistan, Iraq, Chechnya... it doesn't matter -- if it's east of Egypt and west of India, we're assured that it's about oil.

It's not surprising therefore, that the latest mutation of this worldview has found a rich growth medium in the anti-Bush section of our American culture. But what do the data say about George W. Bush's political interests and the economic interests of oil companies? Are they on the same side? Or, as John Kerry has put it, has George W. Bush "sided with the big oil companies" against the people? Not according to the data.

The fact is that the president's interests run directly counter to those of oil companies. In fact, the worse things go for George W. Bush, the better they go for Chevron. That's because the president has tied his political fortunes to the democratization and modernization of Middle Eastern dictatorships, which means that he has set the world on a course towards lower oil prices. It should go without saying, but unfortunately it doesn't, that oil companies benefit from higher oil prices. Astute observers will remember that the great spikes in oil prices of the 1970's were the boom times for Texas towns like Dallas (remember the TV series?). They will also remember that Ronald Reagan's successful effort to break the back of inflation and the resulting plunge in oil prices turned those same cities into ghost towns.

That's why the Iraq war was of no real advantage to the oil sector until things got really tough. During the first year of the war -- up until the casualty spike in April -- the Oil & Gas index was barely beating the S&P 500. From April -- the month containing, by far, the largest casualty report of the war -- to now, the Oil & Gas index is up 22% and the S&P 500 is down just under 1%.

It wasn't until the Iraq War began to seriously turn against the Bush Administration that the S&P 500 and the Oil & Gas index (pictured above) crossed. In other words, the market places clearly and accurately surmised that heavier US combat losses in Iraq, the very thing that has most harmed the President politically, would also mean soaring oil prices and soaring oil company profits. These facts are well known to people who track the energy sector for a living, but virtually unknown among people who track political fortunes on a full-time basis.


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