Meet the new OPEC, Same as the old OPEC

It was bad enough when those pesky foreigners were just rationing the oil they sold us. Now OPEC nations are working towards controlling the supply of refined products - gasoline, diesel, and kerosene. Ouch.

But the oil-producing countries of the Middle East are about to go on a refinery-building boom that, according to energy consultants Wood Mackenzie, will boost refining capacity in the region by 60% over the next 10 years. OPEC (Organization of Petroleum Exporting Countries) members alone would increase their refining capacity by 50%.

That's great news for the companies that engineer, supply and build refineries throughout the world: The International Energy Agency puts refinery spending in the Middle East at $89 billion between 2004 and 2030.

But it's not good news for oil-consuming countries striving for energy independence. If Part Two of the oil-producing countries' energy strategy works, the countries of the Middle East -- which really means Saudi Arabia, since that country has the cash flow to build the most refineries -- will dominate the supply of refined-petroleum products at the margin, just as they do with oil. And that will give the oil producers control over the global price of gasoline, heating oil, jet fuel, feed stock for plastics, etc.

This comes on the heels of news that Russia intends to do the same. In mid-February, Moscow mulled a similar plan - basically, oil producers aren't interested in being the bulk exporters anymore - they want to export the refined products. And you can understand why: there's a large profit margin that OPEC and Russia have basically ignored until now. My only question would be why they've waited this long.

The problem, of course, is that generally speaking the industrialized countries of the west have regarded oil refining as a strategic asset they need to control - you don't want foreign countries to control your supply of gasoline, apparently.

Of course, there's almost nothing we can do about this. If Russia and Saudi Arabia declare that it's illegal to export unrefined petroleum, then a huge chunk of the oil exports are going to stop. Effectively, this could make the price of gasoline as global - and volatile - as that of oil.

Fun times, I'm sure.