President Bush was in Saudi Arabia at the weekend, trying to get his hosts to increase oil production to take some of the pressure off rising prices.

Ever willing to be seen to please their American friends, the helpful chaps at the House of Saud duly agreed to ramp up output by a few hundred thousand barrels a day. This, of course, is a drop in the tanker of Saudi, let alone global energy production, and to nobody's great surprise it had no effect whatsoever. The price of crude crept above $127 per barrel in London trading yesterday.

In economic terms, there's a not very polite term for what the President was doing which describes the futility and discomfort of performing a certain bodily function into a countervailing breeze.

But Mr Bush - an oilman after oil - knows this, too. His efforts were more of a political gesture than a meaningful policy initiative.

In political terms, inexorably rising oil prices are starting to generate something approaching panic in America. The Republicans, already battered by the weak economy and the seemingly intractable Iraq war, are ripe targets for yet more opprobrium for failing to rein-in oil companies as they heartlessly exploit the poor Americans who find themselves unable to drive their five-litre engined cars very far this summer.

The crunch from oil prices plays an important rhetorical role in Hillary Clinton's barely breathing presidential campaign. In her stump speeches to rapidly diminishing audiences, she never misses an opportunity to berate the oil companies - and their Republican friends in government.

Her economically illiterate idea for a gas tax holiday over the summer was predicated on these popular fears about rising energy costs, though one of the many problems with it was that it would probably have ended up channelling even more revenue to the oil companies because it is unlikely they would have passed on the whole tax reduction on to consumers.

Barack Obama has been marginally less demagogic, to be fair, but he can't resist sticking it to the heartless energy companies, either.

The President and most of his dwindling band of Republican brothers (though not, it should be said, the party's presidential candidate John McCain) pursue a similarly silly tack.

They'd have us believe that if only the United States would open up the Arctic to more oil exploration, prices would drop like a stone. In an election, this is all very well. But time is getting on and it is becoming ever more urgent that whoever wins in November drops the populist rhetoric and gets to grips with a couple of basic realities.

The first is that higher energy costs are here to stay. You don't have to buy Goldman Sachs's headline-grabbing forecast this month that crude will reach $200 a barrel.

But it would be foolish to try to deny that in the immediate future, anything we do now will not stop prices rising.

Oil is up by almost 30 per cent this year alone. That's not the fault of greedy energy companies, or that other current favourite, unscrupulous speculators. It is a simple fact of economic life in a world economy that is, in effect, experiencing a new industrial revolution among half its population.

Even in the event of a serious recession in much of the developed world, energy demand is not going to change much.

The second reality is that this is, in the end, at least in terms of the nexus of economics and energy policy, a Good Thing. It should force all of us in the West to redouble our efforts to diminish our dependence on oil. Fortunately, markets are quite effective at doing this. As we all know, the capitalist world - yes, even the US - is much more energy-efficient today than it was 40 years ago. For that we have the last great oil shock of the 1970s to thank.

A third reality is that, at least for the foreseeable future, these higher prices will have enormous implications for geopolitics.

It is a staple of all political debate in the US now that the American dependence on oil has led to staggeringly bad policy for decades towards the big oil producers. It has forced the US into bed with some unsavoury characters and has been the constant factor behind repeated and often baleful US interventions in the Middle East.

Now, in addition to the threats posed by an even more complicated Middle East, the US has to address the challenge of a rapidly enriching Russia, a country that shows every intention of rolling back democratic progress and using its energy wealth to create trouble for America and Western Europe wherever it can.

In the very near future, real, ingenious American leadership will be needed not to make pointless gestures towards the newly powerful energy producers but to ensure we don't turn our dependence on a scarce resource into political capitulation.

gerard.baker@thetimes.co.uk

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