Treasury secretary says high oil prices ‘short-term phenomenon’
RENO – High oil prices are a “short-term phenomenon” driven by the “geopolitics of oil” and other global economic uncertainties, U.S. Treasury Secretary John Snow said Tuesday.
Most market experts estimate that oil prices reaching $50 a barrel are $10 to $15 above what the market can support in the long term, Snow told about 20 local business leaders at a forum in Reno.
“I think there’s a recognition that this $50 price is the result of an anomalous set of circumstances” resulting in part from the current “geopolitics of oil,” Snow said.
“The uncertainties are feeding speculation and that speculation is driving prices higher than something that is supportable,” he said.
“I think it will come back. … The futures market is confirming that. This is a short-term phenomenon,” he said.
Snow said he would raise concerns about oil prices as well as Iraq’s growing debt with world leaders in Washington this week at meetings of the G-7 and at annual meetings of the World Bank and International Monetary Fund.
“Clearly energy has to be right at the forefront of our concerns,” Snow said.
On other topics, Snow predicted the federal deficit will be cut in half “over the course of the next few years and be considered low by historic standards.”
Rising health care costs, combined with high energy costs, are among the biggest barriers to future economic growth, he said.
Snow said making the Bush administration tax cuts permanent would have the biggest positive long-term impact on the economy and that eliminating tax cuts for the wealthiest Americans would be especially harmful to small businesses.
“If we don’t make those tax cuts permanent, that’s an increase in tax rates for Americans. The suggestion we do something good for the economy by raising taxes has nothing to support it,” Snow said.
He dismissed criticism that tax cuts are fueling the U.S. deficit.
“Deficits matter and we’re going to deal with the deficit. But the deficits we find ourselves with have relatively little to do with tax cuts and more to do with recession and the collapse of the equity markets,” Snow said.
Recession caused increased unemployment, reducing the number of workers paying taxes, and businesses were less profitable so they paid fewer taxes, he said. He acknowledged tax cuts had some impact on the balance, “but the tax reductions were at most about one-third of it and the economy was two-thirds of it.”
“Government revenues rise when you have a rising growing economy with people working,” he said.
About 20 activists protested Tuesday across the street from Snow’s round table at the Wiegand Center in downtown Reno. They chanted “Snow Must Go” and waved signs that read “Outsource John Snow,” “Raise the Minimum Wage” and “No More Snow Jobs.”
State Democrats organized a meeting of local small business owners critical of Bush’s economic policy. State party spokesman Jon Summers said that since Bush took office, 82,000 Nevadans have lost their health insurance, median family income has dropped by $1,511 and the number of people living in poverty has increased by 11,000.