As Asian oil demand grows, U.S. will have little say in prices

With oil hovering at the $100-a-barrel mark, we're inundated by calls for a "Manhattan Project" on alternative energy, more regulation of major oil companies and an end to our military presence in the Gulf.

The assumptions are that America's energy demand drives prices, the "majors" determine supply and instability in the Middle East explains recent spikes. So, if this is all our doing, then it can all be our undoing as well.

Would that Washington was so eminently in control of global energy markets.

The big driver on oil prices today is rising Asia's burgeoning demand. At the Cold War's end, Asia accounted for 10 percent of global oil demand. Today it gobbles up double that share. Before 2025, Asia will become the oil market's global demand center, dislodging North America.

So it's basically our blood, their oil.

A second big driver is that many key producers are themselves becoming significant consumers, shriveling their capacity for exports. Indonesia became a net importer years ago while Mexico, a huge supplier for the United States, will head down the same path unless it soon opens up its national oil company, or NOC, to foreign direct investment.

Meanwhile, strongman Hugo Chavez diminishes Venezuela's future export capacity by scaring off investors and — in essence —eating his seed corn: funneling today's windfall profits into socialist programs designed to buttress his popular standing. His latest scheme involves Venezuela's NOC using its logistical networks to import foodstuffs currently in short supply.

Fire-breathing Mahmoud Ahmadinejad pursues a similarly shortsighted course in Iran to predictable outcomes.

In general, all of the big producers are seeing their oil consumption skyrocket far above global growth, with Saudi Arabia, Russia and Norway leading the way. So while rising Asia demands a lot more oil, the biggest sources have trouble boosting production.

What can the major oil companies do about any of this? Not as much as you think.

Increasingly, it's the home-team NOCs that control the bulk of reserves. Today, these state-owned firms directly manage 40 percent of the world's known supply. By 2030, that percentage will rise to roughly three-quarters, meaning Exxon Mobil, BP and others will be squeezed out of new big projects as NOCs grow rich enough to finance these on their own. Already, a significant chunk of the majors' current production is locked into sharing agreements that favor the NOCs as prices rise.