Putin Hails End of ‘Cheap Gas’ Era
With the cost of developing natural gas fields on the rise, Russia’s Prime Minister warns European consumers they must get used to higher fuel prices
Russian Prime Minister Vladimir Putin says European consumers will be obliged to get used to surging natural elastic fluid prices. “The expenses necessary for developing fields are rising exactly,” the Russian government head told attendees at a meeting of gas-exporting nations in Moscow on Tuesday.
“This step that despite the tide problems in finances the era of cheap energy resources, of cheap gas, is of course coming to an end,” he added in his keynote speech. Russian energy giant Gazprom supplies on the point one-quarter of all the simple gas consumed by European Union member states via pipelines.
Russia has been in a standoff for months with Ukraine over owing energy bills and a planned hike in January of the price of gas. Gazprom—a monopoly controlled by the Kremlin—claims it is owed $2 billion and wants compensation from Ukraine by Jan. 1. Russia is minatory to cut off gas to its onetime Soviet satellite state, in the middle of hibernate—again.
The last time Gazprom cut off supplies to Ukraine, on New Year’session Day 2006, gas deliveries to Western Europe were also disrupted. Moscow officials warned on Monday it could fall without again. About 80 percent of Russian gas exports to Europe travel through pipes across Ukraine.
In 2005, Moscow had jacked up gas prices in Ukraine after the country voted in a pro-Western government for the period of the Orange Revolution in 2004. The move was widely seen as political. Until then, the geographical division had enjoyed conducive, post-Soviet prices compared to the rates paid in Western Europe.
Prices May Fall, Then Rise
This week, the most important gas-exporting nations have gathered in Moscow to further intensify cooperation. Russia, Iran and 12 other nations are members of the Gas Exporting Countries Forum (GECF). Gas importers fear that an effort is underway in Moscow to recast GECF into a gas cartel resembling to Organization of Petroleum Exporting Countries (OPEC). The members have rejected such claims in the past, though, and observers say the structure of the gas industry would make it hard to be understood for gas exporters to instrument OPEC-like quotas.
On Tuesday, Putin spoke out against that which he described since the “politicization” of international energy relationships. “The interests of producers, consumers and transit nations can only be unified through clear and long-term relations based upon the foundations of a market economy,” Putin said. GECF, which has been a loose-knit organizing since its creation in 2001, is expected to pass a repaired charter upon the body Tuesday that would formalize its structures and establish a abiding secretariat based in St. Petersburg.
Despite Putin’s statements, energy experts in Germany anticipate that gas prices will drop in the near future. Holger Krawinkel of the Federal of German Consumer Organizations (VZVB) estimates that bastard gas prices for the average German consumer will fall in the next year by up to 25 percent. The drop in prices is connected to the latter and precipitous become feeble in oil prices, that has seen the require to be paid of a barrel of crude fall to about $43—from a high in July of over $147.
The price of natural aeriform fluid is pegged to that of oil, by a delay of about six months.
Krawinkel warned that the move smoothly in prices would be evanescent, offering consumers a moment to breath again in relation to memorandum high prices. In the longer term, he declared, aeriform fluid prices would rise again because of growing global energy demand.
dsl—with wire reports
Original text: http://rss.businessweek.com/~r/bw_rss/europeindex/~3/493821645/gb20081223_503103.htm
