Tuesday, April 22, 2008

Bad News on the Energy Front

Several weeks ago, I asked the question as to whether energy producers were under any obligation to increase production simply because of growing consumer demand. OPEC gave us an answer: no. The major oil producers seem to feel that there is enough energy coming to market, that it is not their problem if non-market forces interfere with those developments (e.g. MEND blowing up pipelines in Nigeria or refinery workers striking in Britain), and that while higher oil prices make consumers uncomfortable, they do not, at present, threaten the health of the global economy. VOA reports from the OPEC meeting in Rome:

OPEC Secretary-General Abdalla Salem al-Badri has said the group is prepared to raise production if the price pressure is due to a shortage of supply - but also said he doubted the connection."There is a common understanding now that [oil prices] has nothing to do with supply and demand," he said.

More bad signs.

Iraq's oil minister, Hussein al-Shahristani, said contracts signed between the Iraqi Kurds and foreign companies remain invalid. Not only does this delay getting fields operational but it also means that progress toward an overall Oil Law is stalled.

Perhaps this isn't a bad sign--eye of the beholder--but Vladimir Putin's visit to Libya indicates that Russia is continuing full speed ahead with its strategy of becoming the world's leading energy broker, not only from Eurasia but increasingly other sources as well--and working to ensure that Russia has a hand in all possible energy supply lines to Europe.

And here again, something that all these league of democracy advocates ignore--Russia is doing this by forging ties with key European conglomerates. In Libya, Gazprom bought some of BASF's assets (this is a German firm) and is now working to set up joint projects with Italy's ENI. And Russia continues to develop the strategy I laid out at the Robert Taft meeting of creating interlocking structures that give Europeans a real interest in Russian success. ENI make work with Gazprom in developing projects in Libya; ENI also controls natural gas fields in Russia--in the Yamalo-Nenets region and holds a 20 percent stake in Gazprom Neft.

This is the wave of the future--energy consuming countries are going to tie themselves to specific producers to guarantee their supplies.
Has anyone explained to voters in US that no US president is going to be able to give orders to OPEC to bring gas prices down?
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