President Bush's response to the Persian Gulf crisis has been masterful in bringing global pressure against Iraq but maladroit in responding to a doubling of oil prices.
Saddam Hussein can take perverse satisfaction in the chaos that has descended on world financial and commodities markets as a result of his seizure of Kuwait. Though there is little evidence he anticipated the isolation and embargo that have made a wreck of his own economy, he has driven up the price of oil, which was one of his initial objectives in trying to bring Kuwait to heel.
In dealing with the oil situation, the president had three choices: He could release large amounts of oil from the Strategic Petroleum Reserve. He could sit back and let market forces set prices. Or he could wobble uncertainly before a token tapping of the SPR that the markets predictably ignored. Unfortunately, he chose this last option.
While denouncing market speculators for an "unjustified" run-up in the price of oil, Mr. Bush announced that only 5 million barrels would be drawn from the Strategic Petroleum Reserve. The White House said it wanted to dampen speculation and influence the markets. Instead, speculators noted that Mr. Bush had released less than one-third of one day's U.S. consumption -- and promptly bid prices higher.
Only later did the administration get around to emphasizing the point that the 5-million-barrel drawdown was merely a "test" of government procedures for auctioning and distributing its oil. By that time it had forfeited much of the SPR's psychological potential. The International Energy Agency demolished what was left of Mr. Bush's policy move by stating there is no need at this time for consumner nations to tap their reserves.
Far more convincing to the markets was the proposal by Mr. Bush and leaders in Congress to add 12 cents to the 9-cent federal tax on gasoline, a step that would discourage consumption. The higher tax would still lag far behind the levies charged by European countries and Japan. But if the tax survives the budget battle, it would constitute a tentative step toward the creation of the meaningful energy policy we have never had.