Recently, as world oil prices tumbled, hard-line OPEC spokesmen such as Secretary General Ali Rodriquez saber rattled about a big production cutback to shore up prices. This of course would significantly increase war costs. But Putin's Russia would have none of it. The world's second largest oil exporter gave OPEC the back of its hand, making it clear that it had no intention of reducing or even slowing the growth of its oil production, whatever the price impact. Indeed, Russian oil shipments are growing faster than any other country outside OPEC, increasing by 530,000 barrels daily — or nearly 10% this year — with another 350,000 barrel increase projected for next year.
Following Russia's lead, other non-OPEC producers Mexico and Norway refused to play ball with the cartel.
Russia's prospering oil industry is an integral part of Putin's free-market economic reform plan. It has become the most decentralized and capitalistic sector in the Russian economy. Even beyond oil, the new Russia under Putin has the second-best, emerging-country stock market performance in an otherwise dismal year for world bourses. The ruble has steadied, inflation has come way down, and economic activity is still expanding at roughly 4% despite a worldwide recession. Earlier this year, Putin introduced a 13% flat-tax rate for its new economy — some even suggest that Russia's new free-market democracy has more in common with the U.S. than with the bureaucratic central planning of the European Union. Putin covets membership in the World Trade Organization. Perhaps it is now time for Bush to hasten this process.
In truth, OPEC's production-cutting bark has been bigger than its bite. News reports have suggested that Secretary of State Colin Powell secured a pledge from the Saudis that they would make up for any oil-supply shortfalls, and that OPEC has been rampantly cheating on its production quotas all year long. In addition, the global economic slump has significantly lowered oil demand.
But OPEC producers are worried about the new Russia. Attempts by the cartel to artificially raise prices will lead to significant losses of world oil market share to Russia. This, of course, is exactly what Russian oil entrepreneurs want.
While U.S. energy policymakers dither in their plans for expanded domestic production, Russia is showing the way. Could it be that Russia and the U.S., perhaps joined by Britain's North Sea oil producers, will work together to finally break OPEC's stranglehold on oil and the world economy? This could be yet another benefit of the new world order that is standing against terrorism and transforming international relationships in politics and the economy.
Of course the U.S. still has concerns about Russian policies on human rights, freedom of speech, missile defense, and other areas. But President Bush certainly knew what he was doing when he established a personal relationship with Putin in several meetings last spring and summer. Now, at least on terrorism and oil, the two leaders can stand together in pursuit of freedom, democracy, and prosperity.
See article at:[url]http://www.nationalreview.com/kudlow/kudlow101201.shtml[/url]
Eric The(DecemberCrudeIsSellingAt$21.25/bbl)Hun[>]:)]