US has few options as oil nations tighten grip

Washington: Resource nationalism in oil producing countries is cordoning off valuable supplies and the United States has precious few options to battle the trend amid a looming supply crunch.

As US oil prices marched above $135 a barrel last month - and settled up 8.4 per cent at a record-high $138.54 on the New York Mercantile Exchange on Friday - international firms have found themselves faced with tougher terms and shut out of the globe's most promising oil basins, a trend known as "resource nationalism".

The United States - the world's biggest oil consumer - stands mostly powerless as national oil companies like Venezuela's PDVSA and Russia's Gazprom block access to key oil reserves and demand a larger share of the profits in exchange for allowing international oil companies to drill.

"There are few good foreign policy options because oil really is our econ-omic jugular," said Anne Korin, co-director of the Institute for the Analysis of Global Security, a nonprofit energy think tank.

Conventional wisdom in past years has been that when oil prices rise high enough, oil companies will have the profit motive to spend the billions of dollars needed to bring new supply sources online.

But resource nationalism has turned such wisdom on its head, investment bank Goldman Sachs said in a recent report.

Resource nationalism "imposes significant policy constraints on the free flow of capital, labour and technology that are substantially limiting supply growth," Goldman Sachs said in its report, which also called for benchmark US oil prices to average $141 a barrel in the second half of 2008.

Such constraints have reduced oil supply growth by one per cent per year, even while the global economy grows at nearly four per cent, the bank said.

'Biggest constraint'

In recent congressional testimony, a top executive with ConocoPhillips said resource nationalism was "the biggest constraint" blocking access to new oil supplies.

High oil prices have emboldened big oil producers to tighten their grip on their oil resources.

In Venezuela, President Hugo Chavez's nationalisation crusade has forced out two of the world's largest energy companies and the Opec nation is preparing a "windfall" oil tax to boost its share of profits from its fields.

Under President Vladimir Putin, Russia brought more than half of its oil industry back under state control, wrestling control away from global majors like BP and Royal Dutch Shell as the Kremlin tightened its grip.