Kuwait Trip: Observations on Oil and Enhanced Interrogations

The following observations on the future direction of oil prices and enhanced interrogations are from my recent trip to Kuwait:

1. Oil Prices: Kuwaitis, along with OPEC, believe that oil sometime during 2009 will be within the $75-$80 range. The rationale for the range is based on the following assumptions: (1) World economic growth, especially in U.S., is expected to occur during the second half of 2009, (2) Since gas prices have fallen below $2.50 a gallon from around $4 a gallon, demand for very small cars and hybrids has plummeted. At $2.50 per gallon, this price structure is anathema to Obama’s plan for the U.S. auto industry. (Obama's plan for auto makers to boost the average fuel efficiency of their fleets to 35.5 miles per gallon by 2016, which essentially means the auto industry will produce smaller cars and hybrids in lieu of SUVs.) Therefore, the price at the pumps must rise either through higher federal excise taxes, tacitly allowing OPEC to restrict production, or some combination of the two, and (3) With oil in the $50 range, alternative-energy sources become less attractive because they are usually more expensive to produce than traditional fossil sources. For example, ethanol, including U.S. subsidies, becomes profitable when oil is approaches $60 per barrel. Therefore, the Kuwaitis fully anticipate that the Obama administration will implement domestic and foreign polices that are conducive to higher, not lower oil prices.

2. Enhanced Interrogations: Much has been expressed and written in the media recently about the negative consequences of enhanced interrogation techniques, especially water boarding, on U.S. relations with the Arab Muslim world. According to many Kuwaitis, the reason the U.S. is disdained to the point of being called the “Great Satan” is not enhanced interrogations but the complete lack of any moral compass as depicted by movies and television shows coming out of Hollywood. Many in the Arab world, especially the Mullahs who are Islamic clergy educated in Islamic theology and sacred law, perceive the reality of the U.S. by what they watch on satellite internet and television, which is a constant streaming of sex and more sex and violence. That is their perception of Americans, which is a complete anathema to the Koran. Here in American we have been mostly desensitized to such programming but not the Arab world.