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SC18

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June 18, 2006 06:59PM
http://www.tulsaworld.com/BusinessStory.asp?ID=060618_Bu_E1_Power48301

Power shifts to nations with big oil reserves

The West is increasingly vulnerable to supply disruptions and coercion.

There is more to today's oil crunch than temporary jolts to supply and demand. What is also roiling the energy world is an enduring shift in the balance of power between the fuel-guzzling West and oil-rich developing countries.

Since World War II, the industrialized world has relied on stable and affordable supplies of crude to fuel economic growth. The United States, Europe and Japan together needed more oil than they could produce. The developing world had plenty of oil, but little use for it and few alternative markets. So industrialized countries tapped the cheap resources of poor ones.

Now this mutual dependency is unraveling and a new order is taking shape, turning the tables on America, its allies and other big energy consumers. Major exporting nations have concluded that they have more leverage than ever before over consuming countries.

Two forces are behind this change. The accelerating industrialization of the billion-person economies of China and India means that global energy demand is likely to keep growing rapidly for years to come. And just as important, the world's top crude-producing countries are keeping a tighter grip on their spigots.

Saudi Arabia and other oil-rich states have balked at making the large investments Western policy makers think are necessary to meet demand in coming decades, although they plan to expand production somewhat in the medium term. Moreover, these nations are using more of their oil at home to meet surging domestic demand, driven in part by new industries that were once the preserve of the developed world.

"The idea is to use (the) advantage of the availability of energy and build industries on that basis," said Saudi Arabian oil minister Ali Naimi in a recent interview in Riyadh.

In addition, petro-states from Iran to Ecuador are flexing their muscles, brandishing fossil-fuel supplies as a weapon in diplomatic disputes, or tearing up contracts with foreign companies.

Major importing nations are scrambling to adapt.
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Wizard 881June 18, 2006 06:59PM

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