G8

The lack of a global framework for the distribution of energy is resulting in growing friction between nations.

Should we rely, instead, on a global free market? Unfortunately, a free market in energy doesn't really exist, because many supplier nations regard oil and gas as strategic assets that must be distributed through nationalised companies. Energy is highly political.

Could a politically free market exist? The signs are that many nations, including the US, would oppose this idea. For example, "Under U.S. law, the first of these aims [a desire to open up Iranian oil and gas fields to exploitation by American firms] can only be achieved after the President lifts EO 12959, and this is not likely to occur as long as Iran is controlled by anti-American mullahs and refuses to abandon its uranium enrichment activities with potential bomb-making applications. Likewise, the ban on U.S. involvement in Iranian energy production and export gives Tehran no choice but to pursue ties with other consuming nations." See: http://www.motherjones.com/news/dailymojo/2005/04/blood_oil_iran.html

Perhaps the G8 could start to sort this out? The Secretary-General of the OECD thinks so; he writes this month on "The Energy Challenge". See:
http://www.oecdobserver.org/news/fullstory.php/aid/1567

The continuity of energy supply is likely to be big worry at the G8. Popular angst that the lights will go out, never mind prices rise, is putting heavy pressure on governments worldwide to do something.

What action can be taken? The issue might rise to the top of the agenda of the G8, but what then? Diversification of supply to nuclear is one temporary solution gathering support.

Pressure on national politicians can lead them to explore the traditional boundaries of unenforceable international rules. For example, word from Ecuador is that the new president is thinking about his options for winning popularity - one is to withhold the service of foreign debt and use the money instead for social programmes nationally. Such are the national pressures on politicians. http://www.nytimes.com/2005/04/22/international/americas/22ecuador.html?

It is doubtful whether the G8 can solve the conflict of national politics versus global economics.

An informative piece in today's press on the geopolitics of energy.

"the Chinese are making deals to secure long-term petroleum supplies from around the globe. In particular, they have their eyes on the world’s largest, politically-safe oil reserves. . . They are just across the US border, in the Canadian province of Alberta. . . the Canadians are sitting on at least the world’s second-biggest reserves, locked in the vast oil sands of Alberta."

"The Chinese . . .want at least two million barrels a day, and the Canadians have already sent a trial shipment of oil. Beijing wants to build a $2.5 billion pipeline from Edmonton to the Canadian west coast to make oil easier to transport. Alberta’s prime minister, Ralph Klein, has been to China to persuade them to invest." http://thescotsman.scotsman.com/opinion.cfm?id=423332005

A worldview for energy? Should energy be market or non-market?

Global energy is becoming non-market. For example, China is increasingly involved in the energy industries of important suppliers to the United States - Venezuela and Canada. And, for now, China have decided not to acquire a large energy company in the US itself. China takes a non-market view, with its national oil companies.

"CHINESE state oil firm Cnooc's sudden departure from the bidding war over US oil firm Unocal in favour of ChevronTexaco's $18.4bn (£9.8bn, E14.4bn) offer suggests that, however high they raise the stakes, buying a US company is still, sometimes, a step too far."

"The three main Chinese state-owned oil companies, CNPC, Cnooc and Sinopec, have expanded operations from just 20 countries in mid-2003 to around 36 this year, striking deals in the Middle East, Africa, South America, and the Caspian."

"With 75% of global oil resources closed to the oil majors, they fear the Chinese might beat them to access. Sinopec early year last won a key contract to develop gas reserves on the edges of Saudi Arabia's Ghawar field on terms no Western firm would have accepted." http://thebusinessonline.com/33470/State_oil_firm_loses_out_on_US_bid

Therefore, at 75% non-market, oil and gas is highly political. As a consequence, countries that rely on the global market are surely unwise to assume that vital energy imports will be available to anyone who can afford them.

The country holding the presidency of the European Union is expected to represent the worldview of the EU at international gatherings, such as the UK hosted G8 Summit in July (see below). Never mind drum up support for the EU constitution.

Yesterday, the president of the European Commission made an official trip to Glasgow . "[José Manuel Barroso] was of the impression that Scotland was perhaps the most pro-European part of the UK." http://www.sundayherald.com/48862

Reconcile worldviews, and get the EU constitution approved? Perhaps too much is expected from all the Scottish raj. (copyright J Paxman)

The International Energy Agency are very worried about depleting fuel reserves globally. They are expected to report this month that there is a need for "dramatic measures, such as reducing motorway speed limits by 25 per cent, shortening the working week, imposing driving bans on certain days, providing free public transport and promoting car pooling schemes."

Germany is taking action: The FT reports "Several German cities including Munich, Stuttgart and Düsseldorf are set to introduce restrictions over coming weeks on trucks and diesel-driven cars using local roads. . ." And the Philippines are going further by cutting the working week of public servants from five to four days, on the basis that the government should give a lead.

Other thoughts from Asia on energy policy? See Simon World, a blog that gives an Asian perspective on many matters. (http://simonworld.mu.nu/archives/071927.php, and http://simonworld.mu.nu/archives/073364.php)

Whose responsibility is it to reconcile worldviews, at least within the EU?

"The European Union now participates at the G8 Summit and is represented by the President of the European Commission and the leader of the country that holds the Presidency of the European Union. When a European member of the G8 hosts the Summit at the same time as holding the EU Presidency, the two roles are combined." http://www.europa.eu.int/comm/external_relations/g7_g8/intro/index.htm

The presidency is therefore expected to reconcile the worldviews of EU countries. Luxembourg has the presidency of the EU for the first half of 2005. The UK for the second half, when it will represent the EU at the G8 Summit in July 2005. At the Summit, the UK will be expected to promote the worldview of the EU.

There is much reconciliation to be done before July. The worldview coming from the French government, for example, is that global capitalism should be opposed. This departure from the norm not only questions whether the EU endorses the global economic system; but also questions the EU constitution.

"In the corridors, Mr Chirac was also heard to say that "ultra-liberalism is the new communism", a dig at Mr Barroso's [EC president] free-market instincts. . . Then in a brutal aside, [Mr Barroso] tried to make sense of Europe's baffling political alignments, where centre-left leaders such as Tony Blair of Britain or Marek Belka of Poland supported liberal reforms, while centre-right politicians such as Mr Chirac opposed them. . . This high-profile feud could have serious consequences. The Chirac-Barroso battles seem unlikely to bolster the Yes campaign in the referendum." http://news.ft.com/cms/s/e752945c-9fb9-11d9-b355-00000e2511c8.html