Two Sumos -- government and big oil companies -- are wrestling for control of the oil industry. And according to the Wall Street Journal [subscription required], a big shift in bargaining power is putting government on top. This could be a crushing blow for oil companies and the people who invest in them.

In the past, oil companies enjoyed the upper hand because they had the capital and the expertise to take on the risk of exploring for new sources of oil. As a result, big oil traded that ability to take risk for equity ownership of oil fields. But since there are fewer new places to explore, governments increasingly find themselves in control of their own energy destinies.

With demand strong and supply dwindling, prices are high and governments have the capital and expertise they need to develop their own energy resources -- leaving leaving big oil companies with a smaller piece of the pie. In some places, the producer nations are simply taking majority stakes in existing projects away from Western oil companies. Even when the Western company is paid for its property, future profits are erased. In December, Royal Dutch Shell PLC (NYSE: RDS.A) was forced to turn over a majority stake in Russia's giant Sakhalin 2 project to Gazprom

When I think of the jowly former Exxon Mobil Corp. (NYSE: XOM) CEO Lee Raymond and his $400 million retirement package, I feel little sympathy for big oil. But if big oil wants to strengthen its long-term profits it will need to find a way to increase its bargaining power. And this could come from developing sustainable energy sources --such as solar and others -- and pushing for greater energy efficiency in automobiles.

The resulting lower prices could strengthen big oil's bargaining power with governments and position it to extract a bigger share of end game profit. Meanwhile it would be positioned to profit from the next big energy wave.

Peter Cohan is President of Peter S. Cohan & Associates, a management consulting and venture capital firm. He also teaches management at Babson College and edits The Cohan Letter. He has no financial interest in Exxon or Royal Dutch Shell.

We have been keeping a close eye on oil over the last week or so wondering just what it was going to take to push the precious crude over $60. Last week I made the prediction that yesterday would be the day that we saw it bust through $60 for good, but I was only partially correct in my prediction.

In fact we did see oil trade up to touch $60 yesterday, but that was as high as it got and never was able to trade above the $60 resistance point. As it turned out, after hitting a high of $60 yesterday, crude prices settled at the end of the day at $58.88. A big reason for the uncertainty was that traders were cautious regarding what we would see with today's weekly inventory report from the Energy Information Administration.

Well, the numbers are in, and what we are seeing is oil moving to the upside again today as inventories did fall more than analysts had been expecting. Looks like the cold weather is starting to have the impact that we were anticipating.

According to today's report, distillates, which are used to make heating oil, fell by 3.7 million barrels, a half million more than the estimated 3.2 million barrels analysts had been expecting. Oil inventories also surprised with a decline of 400,000 barrels instead of the anticipated increase of about 1.4 million barrels.