Mr Sarkozy, the illiberal oil
There are principles and feelings. On behalf of the former, Mr. Sarkozy defends a hard-liberalism. On behalf of the latter, it flouts. Consider oil. Hardly soaring world prices she starts to be painful as the Minister feels sorry: sometimes the fishermen, now on farmers, sometimes on the road. A tax refund here, a nudge here and there. And by January, I promise, a general rebate, unless it is still focused on the unfortunate owners of stately homes heated with oil or the unfortunate owners of 4 4 ×? We expect the following with interest, knowing that in this area, generosity has no limits than election.
It would be wrong to laugh. For playing the fire service, Sarkozy forgets not only the theses he defends elsewhere, but also the lessons of the past. Mostly it seriously mortgage the future.
According to the liberal creed, the best signal, the only regulator of the market, is the price. When demand exceeds supply sustainably, the price increases, prompting consumers to moderation and stimulates producers; term, the market is reflected automatically rebalanced.
This is exactly what happened after the oil shocks of 1970 years. If crude prices fell back in 1986 then stabilized for fifteen years around a moderate equilibrium price (dollars per barrel about 25), it is because all the Western economies, shaken by crises 1973 1979 and especially, had reduced their consumption, diversified energy sources and developing new oil fields in the North sea, Alaska, etc. The supply far exceeded demand, leaving a comfortable cushion unutilized capacities including Saudi Arabia, which used it to stabilize prices in case of problems.
The good weather is over. If crude prices have more than doubled in two years and threaten growth, not only because Bush, in invading Iraq, has deprived the market of a good million barrels per day. There are a few years, Saudi Arabia could easily mopped and lack the accident would have caused a brief swirl of course.
This is the demand, for fifteen years, has slowly inflated to the point of matching production capacity. There are more reserve cushion, even in Saudi Arabia, markets work just in time and the courses are to thank you from the lesser hazard: conflict, strike, failure or cold snap.
The rise in prices is therefore a "good signal", which comes in time to bring consumers back to reason. It will take several years and billions of investments to increase extraction capacity. In the meantime, even if the accidental spikes tighten, oil has a good chance of remaining expensive, at any rate more than it has been for fifteen years. Unless global demand declines sharply, as it did after the first shocks.
It will be more difficult. On the one hand, much has already been done, technical progress and standards helping to break free of the oil constraint. The France through nuclear power, Germany with the coal, Switzerland thanks to heat pumps, etc., are much less dependent than thirty years. On the other hand, the strongest non drift comes from developed countries, but new Asian economies, including China, booming. Finally, globalization, dear to the Liberals, has an unpleasant corollary and hitherto poorly measured: it massively inflates international trade, so the transportation (of goods, people), and ultimately fuel consumption: fuel oil, diesel, kerosene, etc. Now this is where the problem lies.
If oil still covers 35% of global energy needs, it is because he is irreplaceable in transportation, which alone absorb roughly two-thirds of production and continue to increase.
The soaring prices might be a chance. It recalls that the hydrocarbons are finite, it will take the world to learn to do without oil due to not so long ago, the middle of the century or so, and that, by then, he will have to get used to expensive oil. In this perspective, clientelism shortsighted government seems not only ridiculous but also against-productive.
Instead of letting prices discourage the greediest users and sustainably reduce consumption, tax gifts of Mr. Sarkozy break the signal and maintain or even encourage waste. Left to redistribute part of the tax revenues from higher prices, it would be better, instead, encourage energy savings or the development of alternative solutions.
Help, for example, fishermen or farmers to invest in modern and less fuel-fired equipment. Support public transport, piggyback, heat pumps or biofuels, etc. And in any case let the users of "oil pits" like heavy trucks or 4 × 4 penalize themselves.
• ARTICLE PUBLISHED IN THE WORLD EDITION 23.10.04