Located in the southern-middle portion of the Persian Gulf, Qatar has a population of less than 1.5 million but boasts the highest per capita income in the Arab world and is notably rich in oil and even richer in natural gas. With last month's announcement that Qatar is participating in a natural gas "troika" with Iran and Russia, this small Arab Emirate has increased its profile in the energy business and has caught the attention of large consumer nations that are its primary customers. The troika's announced intentions to hold quarterly meetings, sharing information about production schedules, investment plans, and prices, has kindled fears of a new OPEC in the global liquefied natural gas (LNG) business with possible negative implications for the West.

The potential for a new OPEC-like organization in the global natural gas trade to control prices is a hot topic of discussion in the energy industry. A quick review of OPEC's ability to control the global price of oil raises some questions as to the potential effectiveness of the newly announced natural gas troika to control LNG prices.

OPEC was formed in 1960. Its primary goal was to wrest oil producing assets from the post WWII financial, political, and territorial arrangements struck by the U.S., Great Britain, and Russia. Oil prices, adjusted for inflation, were flat to falling for the first eleven years of the cartel's existence. The oil embargo of 1973 and the Iranian revolution of 1978 led to two major oil-price shocks in the 1970s, with OPEC realizing a new and powerful role in the world's economy. Oil prices peaked in the early 1980s and then collapsed in 1986.

When OPEC did collectively flex its muscles in the 1970s it led to two things: Massive demand destruction in the U.S. (oil consumption fell from 21 to 16 million barrels per day from 1979 to 1985) and a large increase in non-OPEC oil production, both of which led to a price collapse that was long in duration. The experience of a sustained price decline in the global oil market greatly tempered the appetite of OPEC's larger senior members to use oil supply as an economic or political weapon.

Adjusted for inflation, the price of gasoline in the U.S. took 27 years to return to highs reached in 1980. This price history of oil and gasoline has brought many to question the real pricing power of OPEC in the global oil market. If OPEC truly controls the price of oil, then how does one explain the rather poor price performance of the commodity for relatively long periods of time? The answer to this question is somewhat complicated. OPEC can exert influence in the oil market, particularly during periods of rapidly increasing demand or when geopolitical events in the Middle East threaten supply. However, a thorough examination of oil price history draws one to conclude that OPEC is more influenced by the forces of global supply and demand than it is a commander of oil prices.

The gas troika countries (Russia, Qatar, Iran) represent an estimated 55 percent of global natural gas reserves. Their control of a very large unmonetized natural gas base positions the alliance as a substantial force in the marketplace. However, the gas troika is apt to find that -- like OPEC -- it is subject to macroeconomic forces far more than it is in control of them.

The formation of an LNG troika is nonetheless troubling from a geopolitical standpoint. Qatar's announcement that it was forming such an arrangement caught many energy analysts by surprise. Qatar deployed troops to the multinational forces led by the U.S. in the first Gulf War, Qatar's security interests are linked tightly with the U.S. and it has strong diplomatic and financial ties to the West. Given Iran's nuclear ambitions and Russia's use of energy as a weapon-of-intimidation in Eastern and Western Europe, Qatar's alliance with these countries has more than raised eyebrows within the EU and elsewhere.

Qatar's ostensible alignment with Russia and Iran is threatening in that Russia will use such to its advantage on the global energy stage. Russia has twice, in the past three years, cut off natural gas supplies to Europe during the winter as blatant leverage of its position as the primary supplier of this vital commodity to that market. Russia's invasion of the Republic of Georgia was predicated on controlling the oil pipelines of the Caucasus region and was a direct warning to Ukraine to think twice about its intention to join NATO. Russia bullied Shell Oil Co., into handing over a large portion of the assets that Shell had developed at Russia's Sakhalin LNG project and is in the process of repeating this performance with BP at another major oil and natural gas producing venture.

The natural gas troika may have a limited ability to control prices for sustained periods of time. Its effectiveness in raising prices above their natural equilibrium dictated by supply and demand will be tested and analyzed. The broader concern for the U.S., EU, and Asian consumers is the geopolitical shift on the part of Qatar that has taken place coupled with the desire and practice, on the part of Russia, to use energy as a political and economic weapon.

Brian Habacivch is Senior Vice President of Fellon-McCord & Associates which is an energy consulting and management company working with its clients' energy personnel to source the most economic and reliable energy supplies available. www.fellonmccord.com.