The oil world's new bullies

Trend: World fossil fuel resources are increasing controlled by countries that are authoritarian and generally hostile to the US. This trend is unlikely to reduce oil prices for US consumers.

Jim Jubak at MSN Money describes the countries that are taking over energy resources from Big Oil. Excerpts below.

Source: MSN Money - The oil world's new bullies - Jubak's Journal

...big oil isn't calling the shots anymore. Venezuela has forced ExxonMobil to slink out of the country and has made Chevron and ConocoPhillips take a 75% hike in royalties and a 50% increase in taxes and say, "Thank you, sir, may I please have another?"

Russia is blackmailing all of Europe by saying "sell us your natural-gas delivery companies or no natural gas for you." Iran has thumbed its nose at the United States and the United Nations, figuring that the world needs its oil too much to actually do anything about its nuclear weapons program. And Chad got the World Bank, the U.S. government and Exxon Mobil to cough up disputed royalties by threatening to shut its oil pipeline.

In 2004, according to the U.S. Energy Information Administration, Russia was the world's second-largest oil exporter after Saudi Arabia. Iran was the second-largest oil exporter in OPEC (the Organization of Petroleum Exporting Countries) after, again, Saudi Arabia and the fourth-largest oil exporter in the world. Venezuela came in at No. 5. (For the record, Norway rounded off the list of the top five exporters at No. 3. It's only the seventh-largest oil producer in the world, but because of its small population, the country exports almost all of what it pumps.)

Of the global oil giants, Exxon Mobil has the biggest proven reserves -- 11.2 billion barrels, according to Energy Intelligence Research.

But that makes the company only No. 12 in the world. And every company ahead of it in the rankings is an oil company controlled by a national government. That includes Russia's Gazprom and Lukoil at No. 9 and No. 10 with 19 billion and 16 billion barrels, respectively, Venezuela's PDVSA at No. 5 with 77 billion barrels, and Iran's NOIC at No. 2 with 133 billion barrels. (Saudi Arabia's Aramco is No. 1 with 263 billion barrels of proven reserves.)

The new oil bullies are showing no reluctance about throwing their weight around. Russia has threatened to cut off energy supplies or to jack up prices to force some of its neighbors to give Gazprom control of pipelines that move natural gas from Russia to European markets. Gazprom, its deputy chief executive Alexander Medvedev, told European Union officials, would retain its export pipeline monopoly for decades.

Iran is clearly counting on the oil deals it has signed with China to insure Chinese support in its battle with the United Nations and the United States over its nuclear weapons program. So far that's working just fine. China and -- no surprise -- Russia have resisted calls for a U.N. Security Council resolution condemning Iran. Venezuela has seized oil fields from Total and ENI, and President Hugo Chavez has sent cheap oil to Cuba, Nicaragua and other Latin American countries in an effort to limit U.S. clout in the region.

The countries of the European Union have decided to strike the best deal that they can with the Russians now while they tax and invest in solar, wind and nuclear projects to reduce their future dependence on Russia for natural gas. So, for example, Portugal, hardly one of the richest countries in Europe, requires utilities to pay 0.31 euros -- about 37 cents -- a kilowatt hour for electricity produced from solar projects. (Electricity costs in the United States run about 10 cents to 14 cents per kilowatt hour.) Germany, Italy and Spain have similar programs. The immediate pain is worth it, European countries like these have concluded, to get rid of these bullies.

And the United States? Government policy is a dreadful combination of the laughably irrelevant with the downright dangerous. On Earth Day, President Bush touted hydrogen-powered cars as a future solution to our oil addiction -- and his administration has requested $5 billion over the next five years for hydrogen research that may result in a marketable hydrogen vehicle someday. Meanwhile, the administration has proposed a fiscal 2007 budget that would slash funding for research to improve energy efficiency -- today -- by 20% from 2006 levels.

And to get angry drivers off their backs, Republicans in Congress have proposed sending out $100 checks so drivers can keep buying gas to fill their cars at the pump.