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Putin says cheap natural gas is coming to an end


The era of cheap gas is coming to an end. That’s the announcement that Russian Prime Minister Vladimir Putin told ministers during a meeting with the world’s major gas-exporting countries, known as the Gas Exporting Countries Forum (GECF). The forum is being attended by countries like Algeria, Bolivia, Brunei, Egypt, Indonesia, Iran, Libya, Malaysia, Nigeria, Qatar, Russia, Trinidad and Tobago, the United Arab Emirates, and Venezuela, according to the BBC.

According to Putin, basically this era of good fortune is ending because industry costs are rising. Here’s a clip from Putin from a CNN article:
 

“The geography of natural gas production is changing: active gas fields are being gradually exhausted, while most of the prospective gas resources are lying far from the leading consumption centers. Therefore, costs related with gas exploration, production and transportation inevitably rise.”

Putin added that Russia is doing everything it can to keep gas cheap, claiming that “Russia invests tens of billions dollars in exploring the regions such as the Yamal peninsula and the Northern Seas shelf and in creating a gas transportation infrastructure.”

But some critics are crying wolf, accusing Russia of using its monopoly on gas (a quarter of European gas comes from Russia) to get rich and push its political agenda. According to the UK’s Guardian, state-owned gas company Gazprom—the largest producer of gas in Russia—simply “doesn’t bother to invest in technology” because it has a complete monopoly on Russian gas exports, which means that it can force more efficient European gas companies to partner up with Gazprom and “share their technological secrets,” says the Guardian.

Forget stealing secrets. Why doesn’t Gazprom just steal the little ones’ milk money too while it’s ahead?

In addition to forcing companies to do its homework for them, Gazprom, along with other domestic companies, reportedly sends nearly $13 billion worth of gas up in flames per year simply because the low price of gas makes it unprofitable to sell. And, the amount of gas Russia wastes is equal to almost 40 percent of all the gas it exports to Europe.

Russia’s efforts to gather all the exporting gas countries together as one unifying group—much like OPEC (the Organization of the Petroleum Exporting Countries)--worries some because it could create a monopoly on world supply and set prices that favor the exporting countries.

According to the BBC, Venezuelan Energy Minister Rafael Ramirez said participant countries wanted to build a solid organization, “which has in its foundation the same principles that gave birth to Opec,” but added that the group would not be a cartel. He says, “We are defending the interests of our countries, that's all.”

Judging by Russia’s actions concerning its own monopoly on gas supplies, it’s hard to know whether the GCEF won’t fall under the same spell of greed. Until then, we at Plenty are hoping that an Obama presidency will ring in a new energy plan so America won’t have to rely on imported gas and oil from greedy cartels.

By: Jessica A. Knoblauch