George Bush's televised speech on January 10, 2007 puts oil prices at risk - again.
It's hard to remove your emotions from an analysis of George Bush's duplicitous demands for yet another massive appropriation of Iraqi war funding. At time of Bush's speech, the U.S. had already spent US$350 billion on a deadly effort with very little returns, despite America's "patience, sacrifice and resolve".
Let's just say that it is hard to believe that throwing additional resources spent on Iraq will bear fruit, particularly when the war funds will be administered by the same bureaucracy in Washington and Baghdad that has already squandered billions of dollars through corruption and mismanagement. Many pundits believe that Bush's "new way forward" is just a ploy to extend the Iraqi war past the Bush's current presidential term, leaving a mess for which the next American president will have to take responsibility - including the stigma of America's defeat in Iraq.
From an international trade perspective, my greatest fear is that Americans will fail to understand that oil prices may well go through the roof if Bush is allowed to make yet another mistake by extending America's presence in Iraq. Currently oil prices are falling, which can lull voters into putting oil on the backburner.
It's what Bush didn't mention in his speech that is most troubling. As brilliantly articulated by David Olive in the January 11, 2007 edition of the Toronto Star, America is losing the war that Bush launched 4 years ago. Iraq has descended into civil war, with 132,000 U.S. soldiers trapped in the sectarian crossfire. Saudi Arabia, Egypt, Jordan, Syria and Turkey have been warning Washington for months that they will invade Iraq to protect their fellow ethnic Sunnis if necessary. Threats to the region from Iran are more publicly known. Even a traditional American ally like Turkey is amassing troops to invade Iraq from the north to protect Turks in Iraq from Iraqi Kurds.
Should the Middle East erupt in conflict, David Olive estimates that world oil prices will jump at least 50%. The world economy will go into shock, with severe declines in stock exchanges around the globe.
After hearing George Bush's speech, I am even more determined to buy oil stocks with low price-to-earnings ratios like Talisman (TLM on NYSE and TSX). A warmer winter is one thing. Deadly massacres and civil war in the Middle East will affect oil prices and world trade far more profoundly, with due respect to the "patience, sacrifice and resolve" that Bush demands but to-date has resolved very few issues in Iraq.
