Two energy monopolies are better than one
Should we be worried by Gazprom’s ambitions to rule the world energy markets? The Russian gas giant has powerful plans to dominate global markets, from the Alaska pipeline to Nigerian production and possibly including the acquisition of Britain’s Centrica.
The company can afford to expand internationally because it is buoyed by cash from record oil prices and it is famously forecasting oil will trade in 2009 at $250 a barrel. The worry is that Gazprom may be instrumental in oil reaching that level.
The former Communist business has embraced capitalism with aggression. Its target is a market capitalisation of $1 trillion - £500bn – making it twice as large as BP and Shell combined. The company, still state-controlled, says non-Russian firms wanting to invest in that country should co-invest alongside Gazprom.
Given BP’s current problems with its Russian partners, such an invitation may not seem appealing – anymore than Western Europe will want to be dependent on such a large supplier for its energy.
Yet the creation of a rival to Opec is competition of a sort. Opec accounts for about half the world’s oil sales and operates as a strict cartel that non-members support. It is an anti-competitive practice that Opec customers have done nothing to end. Gazprom appears to be even less compromising to its consumers, but there is at least the chance that friction between two giant producing groups results in energy prices collapsing rather than soaring further.
