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The soaring cost of oil may not be the Prime Minister's fault but there is something about Gordon Brown that makes you want to blame him for it anyway - as the voters in Crewe and Nantwich effectively did yesterday, on the day that US light crude reached a new record of $135 a barrel.
That they should do so is a measure of the disconnect between Mr Brown and ordinary people: one voter explained that she had defected to the Tories because while she could see herself being able to talk to David Cameron should he turn up on her doorstep, she could not imagine what she would find to say to Mr Brown. But it is also a reminder of what may turn out to be the most damaging and intractable aspect of the present economic crisis: the explosion in commodity prices, especially oil.
Regardless of his culpability for economic woes, this by-election has exposed Mr Brown's image problem afresh. The more he pledges himself to be the friend of "ordinary people" or "hard-working families", the more remote he appears to be from them. Gordon occupies another world and is unaware of or indifferent to what is happening at the petrol pumps, where it now costs almost half as much again to fill up a car as it did a year ago - and it was expensive even then.
Intellectually he sees how things such as higher fuel prices are coming through at the pumps and in utility bills. But emotionally it does not compute. That is the real fall-out from the 10p tax row. It confirmed the impression that he has little understanding of the very real daybyday pressure on people's purses and wallets. It explains why when he goes on television, people switch off - mentally, if not always literally.
He is trapped in a perfect storm. His political touch has deserted him and his authority is ebbing away; the sub-prime crisis is robbing him of his claims to economic competence. And now, to add to his nightmares, he has to cope with the biggest commodity-price shock the world has seen for a generation - and one that arguably threatens to bring down the curtain on a 50-year era of unprecedented Western affluence and consumption.
That really is not his fault but it is fundamental to what people will think of him and his government. Those commentators who say the price frenzy is all driven by speculators and is made worse by dollar depreciation miss a fundamental point. The world's resources are finite but with the industrialisation of China and India, a lot more people suddenly have the money to get their hands on the good things in life - and there are not enough to go round. So the price has soared, not just of oil but of everything a modern economy needs - steel, copper, lead, zinc, aluminium, all of which have hit record highs. Even if all the speculators took their money out of oil tomorrow, market men say the price would fall back at most to $100 - which is still way above anything we have seen before. They believe this because, significantly, the higher prices have not brought about an increase in supply, as the laws of economics say they should.
This is the scary bit. It is years since any new oil field was found which could deliver more than one million barrels a day - and currently the world consumes more than 85 million barrels a day. Put like that, the increase in production of 300,000 barrels which President Bush got out of the Saudis last week was hardly worth the paper used for the press release.
The demand projections are quite astonishing. If China over the next 25 years increases its per capita oil consumption to American levels, it will double today's daily world demand. If the rest of the world seeks to grow too, it will triple that demand, at which point on some estimates there will be barely 25 years of oil reserves left. No one has a clue where that is going to come from. It is similar for the other commodities; shortages will persist even if or when Asia begins to grow more slowly.
Of course, as sceptics always tell us, all extrapolations are suspect and all forecasts are wrong but while we can have furious debates about the pace of change there can be no doubt about the direction in which the world is headed. As the former head of the IMF, Roderigo Rato, said in London the other week, we are reaching the point where all the world's economies cannot grow as fast as they would like to because it takes oil to grow and there is not enough of it. We are entering an era where economic growth will be rationed between nations.
The rationing mechanism will be the price of oil. It will go to those who can afford it. The threat to the West is that Asia will afford it more easily than we will because it is a leaner, meaner society, much less flabby around its consumerist middle. The implication is that we will have to lose that flab but when it is hard for individuals to diet, imagine what it is like for nations.
Secretly, Mr Brown might prefer the challenge of problems that are 20 years off rather than those which are here and now. But this is not an option for him: it is the here and now on which he is being judged. Governments have recovered from worse mid-term hits than Crewe and Nantwich and bounced back to win a general election. Every day that feat will become tougher, though. For it is unlikely but feasible that he could learn to connect with the electorate and get them to share his vision; and unlikely but possible that the fall in house prices will be modest. But it is impossible to see oil prices dropping far enough and fast enough to get him off the hook.
All the time they are high and rising they exact a huge toll on the economy, increasing the cost of everything, putting firms out of business and causing rising unemployment. At the same time, at the personal level, money spent on petrol cannot be spent on other things, so it acts like a massive tax increase.
And, however unfairly, people will come to hold the Government responsible in some measure for their woes. Highly priced oil and the economic disaster it unleashed in the Seventies eventually swept Jim Callaghan from office and Labour into the political wilderness where it languished for 18 years. A knowledge of history can only add to the discomfort of the current incumbent of No 10.
Reader views (4)
Gordon is waffling on about 2 years to get UK back on track, he will be finished by Xmas when there are riots. If people cannot put food on the table or pay the cost of transport or heating then its bye bye Gordo once and for all - forget the poll tax riots this will be far far worse.
- Edriordan, Wisbech
Np from Cornwall; the moment the 'trimming down' of the Welfare State affects you, you will begin to scream in indignation. What!! You mean that I have to pay for this operation myself?
- Dectora, London UK
It's not oil that's expensive, it's the tax that makes it expensive. Take off the tax and it becomes very affordable. Of course, we have to pay for this very expensive welfare state. Time to trim it down, heavily.
Ref the East/ West debate, if the US economy struggles, then the Chinese haven't got a market and then they can't afford oil either. There is an automatic balance. It would make sense for the world to have sensible oil prices at present, especially with the other economic problems. For some reason, the masses have to be screwed so that a few speculators can continue their orgy of greed. The system, needs changing. Giving banks our money (BoE bail out) helps finance speculation. They don't want to lend it to us for brick boxes that will lose most of their value.
I'd like to see some evidence re. the development of alternate energy sources.
How about large scale nuclear electrical generation, crack water into hydrogen and oxygen. You then have a universal fuel for vehicles and aircraft, and the pollution is water vapour. However, I bet some eco-warrior will still find fault with that idea. Thanks for reading and God bless us all, we're going to need it.
- Np, Cornwall, UK
According to Mike Rothman, from ISI, a New York consulting group, global demand growth slowed down over 80% between 2004 and 2007, from 3.6 to 0.7 million barrels per day (mbd).
This was well within the limit of the non-OPEC increase in production, 0.8 mbd.
If the acceleration in prices is due to speculation, the government should re-balance the economy by heavily taxing transactions of commodity speculators, and use the revenue to finance a reduction in fuel duty.
However, that sounds like genuinely giving money back to people, so I can't see Gordon doing it.
- B, London
