Oil146;s not well

As other non-OPEC nations like Russia and China gain power on the energy front, the effects are being felt globally

If gasoline prices have you muttering curses at OPEC, maybe you should just say nyet. The big-time producers in the Organisation of the Petroleum Exporting Countries have plenty of clout, but with global oil output barely covering demand, countries outside the cartel are wielding more sway, affecting the price of oil and everything made from it.

Indeed, when world energy leaders gathered in Houston last week to dissect industry issues, their remarks were translated from English into only two other languages8212;Russian and Chinese. Daniel Yergin, chairman of conference sponsor Cambridge Energy Research Associates, said the language selection 8220;just reflects the force of globalisation.8221;

So did the delegates8217; list: 55 countries were represented at the influential energy conference, including a large contingent from Russia. With substantial oil and the world8217;s largest natural gas reserves, Russia has seen its dominance grow on the world energy stage. But the country8217;s trading partners, particularly European nations, have grown increasingly wary amid moves by the Kremlin to use its supplies for political leverage. A US Energy Department report described it as 8220;an inclination to advance the state8217;s influence in the energy sector, not to reduce it.8221;

Critics cite the Kremlin8217;s efforts to gain more control over oil and natural gas projects that involve major outside oil companies, such as Exxon Mobil Corp. and Royal Dutch Shell. They also point to a January dispute between Russia and Belarus over oil taxes that led to a cutoff in the flow of crude oil through a pipeline serving European customers. And a year earlier, natural gas producer OAO Gazprom cut off supplies to Ukraine because the two nations couldn8217;t agree on price 8212; a disruption that affected exports to Europe.

8220;Russia uses energy now because that8217;s where it has strength,8221; said Elena Herold, a strategist at Washington-based PFC Energy and an expert on Russian energy issues. 8220;That8217;s why whenever the US says something unpleasant about Russia or to Russian officials, Russian officials in response become kind of nasty about their ability to cut off supplies here and there. It8217;s paranoia on both sides.8221;

Curtailing a large share of its massive oil and natural gas exports, however, is a threat Russia couldn8217;t afford to carry out, Herold said. Tax receipts from oil and natural gas sales fund about half of Russia8217;s annual budget, she added.

In a speech during the Houston event, US Energy Secretary Samuel Bodman chided nations that have used their resource clout to radically change 8212; or cancel 8212; long-term oil deals with foreign oil companies. While he did not name the countries, it was an apparent reference to recent actions by Russia, Venezuela, Ecuador and others. 8220;Moves to restrict foreign investment and increase the reach of state-run energy industries limit access to capital and to the expertise needed to unlock new resources,8221; Bodman said. 8220;While this type of behavior may garner some short-term advantage, in the long run, it deprives those very countries of productivity and prosperity.8221;

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Bodman also made clear his displeasure that Russia and Qatar8212;which together hold more than 40 per cent of the world8217;s natural gas reserves 8212; recently agreed to discuss forming a natural gas producers8217; group akin to OPEC. The suggested gas cartel has even picked up a nickname: 8220;Gas-pec.8221;

8220;I don8217;t like it. It is not something that we encourage, and I will make my views known as I visit with the various ministers in question,8221; Bodman said. 8220;All countries can act as they see fit 8230; but I think it8217;s fair to say that efforts to manipulate markets; efforts to try to organise the suppliers in such a fashion, over the long term, is not going to accrue to the benefit of the suppliers.8221;

With more than 1,680 trillion cubic feet of natural gas reserves, almost twice as much as the next-largest country, Russia is the world8217;s largest natural gas exporter, according to the Energy Department. In a speech at the same Houston event, Andrei Reus, Russia8217;s deputy minister of industry and energy, decried the mood of distrust that has begun to colour worldwide oil and gas markets.

8220;The measures we undertake are not always properly interpreted,8221; he said through an interpreter. 8220;While our dialogues with business and government representatives yield productive results, the Western mass media are always suffering from an old disease called 8216;Russophobia8217;. Only this time it8217;s energy.8221;

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China, meanwhile, has become a force in world energy markets because of the country8217;s fast-growing demand for oil and natural gas. The country8217;s rapid rise in energy consumption is closely watched by commodities traders, and other nations have begun to fret that China8217;s drive to secure supplies will keep prices high and make imports harder to come by. 8220;A few years ago, the Chinese were not a big player either in the industry or as consumers,8221; Yergin said. 8220;Now they are very big players in both areas.8221;

8211;Elizabeth Douglass