Friday, January 13, 2006

Cheating at the Great Game?

I haven't seen this written up too much, which is odd given how much attention gets paid to Hugo Chavez and the OPEC ministers and how damn much we have to pay for gas anyhow, but...

China and India, the world’s two fastest growing energy consumers, on Thursday set aside long-standing rivalries and agreed to co-operate in securing crude oil resources overseas... Under their agreement, Chinese and Indian oil companies will establish a formal procedure to exchange information about a possible bid target, before agreeing to co-operate formally.
Ah, good old cartels. They're excellent ways to reduce costs over the short term, and this agreement may well alter the global competition for oil - just like the latest pronouncement from Tehran does or, for that matter, indigestion on the part of some crude oil buyer at the futures exchanges. Indeed, that's one claim made by Patrick Doherty in his article on the agreement at "The significance of the alliance is enormous. India and China represent the two leading sources of increasing oil demand globally... It is clear is that this pact escalates the global competition for oil."

But cartels - OPEC included! - are notoriously hard to sustain for very long. This historical truth only carries more weight when you consider the colluders here: two rising powers with clear, differing national interests. It's probably not a matter of whether one of the partners abrogates the agreement so as to achieve another aim, but when that will happen. If the stakes are high enough to facilitate the construction of this agreement, then they're high enough to facilitate its destruction. And I'll bet sooner, not later.