RusEnergy

07-20-2006 Andrei Kolesnikov, RIA Novosti political commentator - The summit adopted one of its key documents -- a declaration on global energy security - at the time when the price of Brent crude oil skyrocketed to $78.08 per barrel. After adjustments for inflation, this figure is below the record prices of the global crisis in the early 1970s, when the idea of energy security was born, or the peak of the early 1980s shock. But in a way, this event symbolized the urgency of the declaration. The latter contains all major global concerns and fears - high and volatile oil prices; the growing demand for energy, driven by the expanding global economy (the declaration predicts that by 2030 demand will increase by more than 50%, and 80% of it will come from fossil fuels); depletion of non-renewable energy resources, which currently meet 86% of global energy requirements; geopolitical risks (60% of proven oil reserves are in the Middle East); political instability in some oil-producing countries (attacks on foreign oil refineries in Nigeria, or nationalization of the oil and gas industry in some Latin American countries); and, finally, natural disasters. This is a conservative list of risks and threats, and it is far from complete. Steadily growing prices for all energy sources are creating a new economic reality. Obvious inflation risks are one of its features. High prices are bound to push up interest rates in the U.S. and Europe, making reliability of fuel supplies a vital element of energy security. But even if energy supplies are secure, there is also the risk of non-renewable fuels going into a headlong decline. However, this fear may be highly exaggerated. The declaration proceeds from the premise that fossil fuel reserves are limited. However, the BP's latest Statistical Review of World Energy shows that global proven oil and gas reserves continue growing. In his recent interview with Kommersant, Cambridge Energy Research Associates Chairman Daniel Yergin said that this is the fifth time in modern history he has heard talk of declining oil reserves. He does not believe that this is the case - it all boils down to the price that consumers are willing to pay. Financial Times columnist Martin Wolf thinks that fossil fuel reserves will last for at least half a century, if not longer. The G8 declaration lays emphasis on the same point: "Large-scale use of renewable energy will make a significant contribution to long-term energy supply without an adverse impact on the climate. Renewable solar, wind, hydro, biomass, and geothermal energies are becoming increasingly competitive with conventional fuels in terms of cost, and a wide variety of current applications are already cost-effective." Peter Davis, Chief Economist at BP, noted the growing interest in wind energy, ethanol, and hydro energy. In 2005 the latter registered a 4.2% global growth. It is obvious that in 20, 30, or 50 years the world's energy basket will be very different from the current one, in which most space is occupied by oil and gas and less than 2% by renewable energy sources. But politicians and energy experts also have more immediate concerns, and the general implication of the summit's energy topic was easy to see: Russia is interested in "the growing interdependence of producing, consuming and transiting countries." In other words, the security of energy producers is no less important than that of energy consumers, and reliability of supplies is as important as guaranteed long-term demand. This is why Russia attaches so much importance to the exchange of assets between foreign and Russian companies. The declaration has recognized the significance of forming a partnership to resolve potential problems in the triangle of producing, consuming, and transiting countries, but that's about it. Exchange of assets will be discussed outside the G8 summit. This issue has economic, political, and even diplomatic aspects. Now Russia will be able to quote the declaration on energy security in future debates.