Marketplace: News Archives

Wednesday, September 20, 2000
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It's Wednesday, the 20th of September. I'm David Brancaccio.

Traders on the New York Mercantile Exchange bid the price of light crude oil up to $36.70 a barrel today, the highest in ten years. It's true that this comparison ignores inflation. Forty-dollar oil in the run up to the Gulf War would be like $52 a barrel today. Nevertheless, the world over the last decade got quite addicted to cheap oil, and the current climb in prices, blamed on everything from Iraq to low inventories to presidential politics, is beginning to bite. Marketplace's Washington editor John Dimsdale reports.

Dimsdale: "Oil markets are caught in a kind of perpetual spiral right now. Nobody wants to build up any stockpiles of oil because prices are high, and prices are high because of worries that stockpiles are so tight. In such a jittery market, even the potential of a disruption of supply can trigger panic buying or hoarding. And you don't have to look hard to find that potential. Iraq has been steadily selling more oil since the Gulf War and is now the world's fourth largest supplier. This month, the United Nations is trying to negotiate another war reparation payment from Iraq and oil expert Daniel Yergin at Cambridge Energy Associates says the industry is worried Saddam Hussein might turn off the spigot."

Yergin: "For the next week or two we're in a very, very delicate moment in the world oil market that will have a lot of impact on what happens in the world economy."

Dimsdale: "The current oil price spike has sparked calls for the President to release oil from government stockpiles. But that's politically sensitive this close to a presidential election. And oil analyst Jay Saunders of Deutsche Bank Alex Brown says some in the administration don't want to see the government intervening in the markets."

Saunders: "So, they've met some resistance, especially from the Treasury Department, to establish that precedent for a reserve that was established as a last resort, defined as a crisis situation like a war, like the Gulf War."

Dimsdale: "With many predicting high oil prices for the foreseeable future, it could be a long, cold winter with uncomfortably high prices for heating oil, natural gas and gasoline. At the Alliance to Save Energy, President David Nemtzow says it's time for Americans to start conserving again."

Nemtzow: "You know, we're watching the Summer Olympics on TV, right? It's hard to think about winter already. But you have to, whether it's tuning up the furnace or fixing the cracks in windows we've let go unfixed. Consumers are going to have to help themselves this time."

Dimsdale: "Nemtzow says the government should offer tax incentives for better conservation and fuel economy. And, he says, it's time for the nation's auto industry to step up research into more efficient cars. In Washington, I'm John Dimsdale for Marketplace."

The Europeans today took a stand against the widening gab between rich and poor countries. The European Commission in Brussels approved a plan designed to help the world's poorest countries improve their situations by selling more of their wares in Europe. Under the system, so-called Least Developed Countries will be able to export their products duty-free to the European Union. Arms and other weapons exports are the exception. Forty-eight countries, from Madagascar to Haiti, could take advantage of this. In May, the Congress approved and President Clinton signed a law that eliminated tariffs on many products from sub-Saharan Africa and parts of the Caribbean.

This move by the Europeans underscores the limits on Washington's flexibility. Bold steps toward trade liberalization are not exactly in the cards when the U.S. is running a record trade deficit with the rest of the world. Just-released numbers for July show the U.S. bought about $32 billion more worth of goods from trading partners than we sold to them. Soaring oil costs were one reason. Also, the weak European currency makes U.S. cars and computers more expensive for Europeans and persuades Americans to buy more, cheaper stuff from Europe. Deficits with Japan, Canada and China also hit new records. Business analyst Stephan Richter helps us crunch some of these numbers.

Richter: "It seems that every month there is news of yet another record U.S. trade deficit. In 1999, those monthly deficits added up to a whopping $269 billion. And who's to blame? During the recent debate over trade with China, many politicians and economists were quick to say, 'It's the Chinese!' But how much is the individual Chinese person to 'blame' for the U.S. trade deficit? Our deficit with China is $68 billion. Divide that by 1.3 billion, that's China's population, and it turns out that each Chinese is responsible for a meager $55 of last year's $269 billion cumulative U.S. trade deficit. By comparison, each Japanese was responsible for $586 of the trade deficit. And, if you insist on blaming somebody, just blame Canada! Take our $32 billion trade deficit with Canada, then divide that number by 31 million, Canada's population. Et voila, each Canadian shoulders the responsibility for over $1,000 worth of the cumulative U.S. trade deficit. Of course, when it comes to America's penchant for importing more than it exports, why blame anyone, except ourselves?"

Stephan Richter runs TheGlobalist.com, an online journal on the world economy.

There was a mildly unnerving moment today when the Dow Jones Industrial Average dropped 221 points, that's two percent. But luckily, you have a life and weren't watching this as carefully as we were because things improved quite a bit as the day wore on, with the Dow ending down 101 points or 0.9 percent. The Nasdaq went the other way.