European Economies Over a Barrel

Another reason the Europeans may have decided to mute their criticism of George W. Bush (search) during his recent friendship romp to Western Europe: It's the economy, stupid.

Yes, the so-called Eurozone (search) is falling behind the U.S. again as reported in The Financial Times on Friday. The American growth rate hit 3.8 percent for the last quarter. The Euros are in the tank. In fact, the French economy — a worker's paradise where no employee is allowed by law to work more than 35 hours a week — is now plagued by a full 10 percent unemployment rate. Ten percent isn't much different than 9.9 percent, which is what the unemployment rate was just last month. But double-digit unemployment is kind of breathtaking, even if it is in France.

And on top of all that, Saudi Arabia announced that the $50 plus price of oil will probably be around for a while — the heads of major western consumer nations gasped and started hollering.
Hey, it's bad for a lot of people including the U.S. — obviously. But the Europeans were especially anguished because their economies seem to be so fragile at the moment. The last thing they need to hear is that 50 buck-a-barrel oil is now normal.

This will, of course, enrich the Saudis, the Russians and — with any luck — the Iraqis. But there's no sign this stratospheric price of oil is bothering India or China much. They're rocking along with booming economies despite the hit that comes with expensive oil.

But, just thinking here — maybe oil isn't so high. If the slide of the dollar has reduced its value about a third, that might mean the oil producers need to get another third if they're getting dollars to make up for the slide. If that's the case then the real price of oil is about a third less, which means it's about 35 bucks a barrel in adjusted bucks.

So who does this hurt most? People buying oil with expensive euros, that's who.

What a shame.

That's My Word — have a nice weekend.

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