Speculation. Do oil price developments once again represent the biggest threat to global economic recovery? Consumption has fallen and alternative energy projects are multiplying, but speculation about the possibility of a vicious hike in oil prices has resurfaced. This rise would not be due to increased demand, reduction in supply or other economically understandable reasons, but rather to financial manouvering. We should not accept all information from the USA or the City of London as gospel; some rumours are fabricated or exaggerated and used to help speculation. The risks, however, are real enough.
There is absolutely no relationship between real oil production in the world and futures (in other words, financial products which speculate on price increases): specialists talk about the volume of futures being seven times greater than the rate of production: 600 million barrels a day as opposed to 88! The current price on the Nymex (New York Mercantile Exchange) is around $80 a barrel after having fallen to $40. Experts affirm that if it goes above $100, economic recovery would be strangled at birth - and let's not even mention the possibility of a return to $147, a level reached during the summer of 2008 and which some economists consider as the real cause of the financial crisis.
A dangerous disparity. The political authorities now undoubtedly have a number of improved and enhanced instruments, and EU projects in this direction are largely positive; but how much time is still needed until efficient governance in the financial world is completed and fully functioning? The Swedish presidency of the Council is seeking to speed up the legislative work but the European Parliament is calling for a timeframe in which to exercise its new powers as “a 50-50 legislator”: the president of the competent parliamentary committee has requested six months for the European Parliament to give its verdict on the chapter on “supervision”. In the meantime, the banks are reimbursing public funding as a way of recovering their full freedom of action, while control instruments still remain weak. The consequences of this disparity in the oil sector are plain to see. The situation has not evolved very much since the recent observation made by Pascal Lamy who denounced “the gaping hole in international regulation of financial activities, when this is in fact the domain in which globalisation has reached its maximum level”. This is the paradox in finance: maximum globalisation, inexistent or weak discipline.
EU instruments. Faced with these risks, the EU must use all the instruments it has at its disposal and explore all areas of possible action. The four objectives that follow contain numerous complications and therefore require resolute political determination:
1. The common energy policy included in the Lisbon Treaty includes: a) completion of the common energy market not only in the legal arena but also “on the ground” by way of creating the necessary installations; b) coordination of national initiatives with regard to third countries. Blatant shortcomings exist here because each member state acts as it sees fit and according to it own national interests.
2. Putting the many projects into practice that will guarantee the security of supply coming from third countries, particularly Russia (see point 4) but this is not the only concern.
3. Maintaining a strong euro, which partially protects the EU from oil price hikes in dollars. Stabilisation of the dollar is certainly desirable, indeed, in the long-term, it is crucial. This requires, however, an improved balance of payments in the US, namely the temporary reduction of imports from China but also from Europe into the US - and this issue is never mentioned.
4. Energy cooperation with Russia should be developed no matter what reservations exist about the policy of the Kremlin in other domains (see this section in EUROPE 10018). Recent progress has been made with the agreement on the early warning system, and more progress is expected to follow even if compromises prove necessary. The EU must make its position known as Russia's almost exclusive gas and oil customer.
According to certain indications, the idea of a genuine European energy community has not been ruled out in the near future, and this would represent the final building block in the edifice.
Am I being overly optimistic? If I am, I apologise to our readers who are often more sceptical about European prospects, but let's not forget that it is confidence in the future that has always guided the steps and achievements of Europe's founding fathers.
(F.R./transl.fl)