May 17, 2006

About Mr. Martin Wolf’s own oil shock

Sir, Mr. Wolf seems to suffer his own oil shock when confusedly argues how “The blessed borrower helps the world survive an oil shock”, May 17. In fact it is the US who is partly to blame for the current oil crisis, not only because it is by far the biggest energy consumer per capita but also because it has never wanted to use its financial superpowers to enter into long term purchase and supply contracts with oil producers at “reasonable” prices for both sides. At this moment when as Mr. Wolf correctly states the US’s “back is not infinitely broad”, what it should do is to slap a $3 tax per gallon of petrol (gas) to bring its price to European levels. This would earn the US government $300 billion that would make a real dent in their fiscal deficit; reduce their current account deficit in a targeted way; and take the sting out of oil demand which would reduce oil prices for the rest of the world. To instead praise the US for borrowing on their credit cards just in order to sustain their addiction to oil does not really sound right.

Sent to FT, May 17, 2006