OPINION/COMMENTARY

The Trouble with Oil SO NOW WE KNOW. If the demand for oil grows at a surprising rate, and the supply is constrained, the price will rise. Add myriad threats of supply disruption, an infrastructure which has been starved for capital and environmental permits for a decade, and a producer cartel, and you get increases that are sharp and enduring. Anyone who missed that lesson in his elementary economics course will certainly have learned it from the business press in recent months. Unfortunately, concentration on daily price movements diverts attention from the more threatening changes taking place in oil markets. Most important is the realization by consuming countries that the internal political dynamics of their producer-suppliers trumps the needs of customers every time. Consider three of the world's largest producers, sitting on some 40 percent of the world's reserves: Russia, Saudi Arabia, and Venezuela. Vladimir Putin is unconcerned about the price effects of his assault on Yukos, Russia's largest and most efficient producer. He feels it imperative to eliminate Yukos' principal shareholder, Mikhail Khodorkovsky, as a political rival, and to transfer Yukos' major production properties to a company controlled by his former KGB buddies....