THE energy, financial and political woes that grip the US signal a decisive shift in world power, mocking the liberal delusion that Barack Obama or John McCain can return American prestige and power to its pre-Bush year 2000 nirvana. There is no such nirvana. There is instead a new reality: the greatest transfer of income in human history, away from energy importers such as the US to energy exporters; the rise of a new breed of wealthy autocracies that cripple US hopes of dominating the global system; and demands on the US to make fresh compromises in a world where power is rapidly being diversified.

Far from the Obama-McCain contest being America's saviour, it has another dimension entirely: evidence of the generic failure of the US political system. The US struggles but seems unable to confront the world that exists. It slips into pessimism while fooling itself another irresistible revival is just around the corner. But the structural trends offer a different conclusion.

Despite cyclical fluctuations, world oil and energy prices will stay high, driven by long-run changes in supply and demand. This provokes a global wealth redistribution without precedent to oil exporters, mainly in the Middle East and Russia, that marches in tandem with China's export-driven current account surplus. It is an extensive transfer of economic power away from the US to nations that are not mainly democracies, a dynamic that is the subject of agonising review in seminars and debates in the US.

Flynt Leverett, former director of Middle East Affairs on the National Security Council, says: "The international economic position of the United States has deteriorated substantially since the new millennium. The big trends in global finance and energy markets are working against the US. There isn't any solving this problem in terms of making it go away. These are ongoing realities. The energy picture is not going to change: it is here to stay."

World oil prices have risen from $US16 a barrel in 2001 to $US140 ($145.50) a barrel today. No respite is in sight. This week the International Energy Agency warned that the oil market would stay tight for the next five years, with the capacity to expand supply severely restricted. Non-energy-rich developing nations will be crippled and confront recessions, dislocation and violence; giants such as the US will face deep political and economic adjustment. Australia is both a winner and a loser as its coal and gas export prices rise and it pays more for petrol; but it is a big winner overall from the broad-based commodity boom likely to run for decades.

Writing in the May-June issue of Foreign Affairs, US strategic analyst Fareed Zakaria, whose new book The Post-American World is reviewed in The Weekend Australian Review today, puts the oil trend into a wider context, arguing that the third great power shift of the past 500 years is under way.

The first was the rise of the Western world that began in the 15th century; the second was the rise of the US in the late 19th century; and the third is what analysts call the rise of the rest. This is the shift in power to parts (but not all) of the developing world that are "experiencing rates of economic growth that were once unthinkable" and whose total gross domestic product surpasses that of the industrialised nations. Countries driving this structural change are China, India, Brazil, Russia, the Organisation of the Petroleum Exporting Countries and Gulf nations, and parts of Southeast Asia.

This points to a more complex global power structure, unlike the duopoly of the Cold War or the brief US unipolar period post-1989 that so deceived US President George W. Bush. For Zakaria, "on every dimension other than military power - industrial, financial, social, cultural - the distribution of power is shifting, moving away from US dominance. That does not mean we are entering an anti-American world. But we are moving into a post-America world."

Opinions are divided about the strategic consequences. In his new book The Return of History and the End of Dreams, US analyst Robert Kagan argues that "the world has become normal again" with the smashing of hopes for a post-1989 liberal international order based on democratic values and US dominance. Instead, Kagan argues, the future will witness a range of powerful nations aspiring to be global or regional powers - Russia, China, India, Japan, Europe and Iran - working in various forms of co-operation and competition with the US.

Energy and financial trends are reinforcing. Sovereign wealth funds from nations with a current account surplus have more than $US3trillion in assets and this figure will grow to $US12trillion by 2015. The biggest funds are those of China and the Gulf Co-operation Council. This technique, in one form or another, is followed by China, Saudi Arabia, Kuwait, Singapore, Brazil and Russia. Leverett says the GCC will surpass China to "become the world's most important investor".

Western oil companies own only about 8 per cent of proven oil reserves. Energy-rich governments and national oil companies own more than 80 per cent, a significant structural shift since the 1970s. As demand for energy continues, the cash reserves of oil exporters and their sovereign funds will expand dramatically. This drives a transfer of global financial power and creates huge imbalances.

Where do such funds go? They finance America's excess of consumption over savings. The US needs about $US2 billion each day to finance its trade deficit. These funds are coming, increasingly, from the energy and export-strong developing nations courtesy of their governments, which control sovereign wealth fund strategies. Going into US bonds and securities, such investments constitute a heavy US dependence on the developing world's trade surplus nations.

In his comments this week to the Carnegie Council workshop in New York, Leverett said that when US politicians talked about achieving energy independence, "either they don't understand how stupid that is or they do understand and say it anyway". He argued that the classic remedy to confront the US's declining currency was to raise interest rates and balance the budget, but there was no sign "that either McCain or Obama will do this". The US debate "was about some other planet from where we are now".

In the current issue of The American Interest, Gal Luft, from the Institute for the Analysis of Global Security, argues that "perpetually high oil prices will undoubtedly transform the existing world economic order". Even below today's prices, OPEC could potentially buy the Bank of America with two months' worth of production and General Motors with six days' worth. This dictates only one sensible response: non-petroleum fuels must become the US's top strategic economic priority, to be introduced over a generation.

The US is tied to interdependence with sovereign wealth funds. In the present US crisis, Bear Stearns has disappeared but other US financial institutions would have sunk without the operation of these funds.

The US is hostage to global oil markets, for years having refused to embark on radical reforms to break its consumer oil addiction. The price of such refusals will plague the present generation of politicians and consumers.

Addressing the same Carnegie Council workshop, Nikolas Gvosdev, editor of another publication, The National Interest, said the idea that the US could determine the global order has been terminated. It is not clear whether the US Congress grasps this reality. The alternative world order to the liberal internationalism favoured by the US is that defined by state-to-state negotiations and agreements. This is the favoured model of Russia and China and many other emerging countries.

This model gives priority to state sovereignty and non-interference; it asserts the international system is for states, not individuals; it contradicts New York Times columnist Thomas Friedman's theory of globalisation based on the rise of individualism via technology; and it means that the rise of the rest equates to a growing premium on state power as more countries feel able to assert their national interest.

This is the threat that dominates Kagan's book. "Chinese and Russian leaders are not just autocrats," he says. "They believe in autocracy. The modern liberal mind at 'the end of history' may not appreciate the enduring appeal of autocracy in this globalised world."

The logic of Kagan's position is that the UN Security Council is paralysed not just by different interests, it is paralysed by rival ideologies about the international system.

Kagan quotes Russia's Foreign Minister Sergei Lavrov as saying that "for the first time in many years a real competitive environment has emerged in the market of ideas" between different "value systems and developments".

China puts it bluntly: the selection of whatever social system by a country is the affair of the people (read government) of that country. This strikes at the deepest orthodoxy of US strategy and ideology. The first sentence of the 2002 National Security Strategy signed by Bush says: "The great struggles of the 20th century between liberty and totalitarianism ended with a decisive victory for the forces of freedom and a single sustainable model for national success: freedom, democracy and free enterprise."

This claim is now in doubt. Such doubts will be reinforced by the shifts in global energy and financial power during the next decade. US analyst Steven Weber, who has written for The National Interest on the fracture between the West and the rest, says of Bush's declaration: "These are powerful sentiments, powerfully expressed. But they are simply not factual representations of today's operational global reality. The world doesn't look like that."

Zakaria remains an optimist. He says the choice for the US is between adjusting to a world of more diversity and viewpoints and watching a process of "greater nationalism, diffusion and disintegration" that rips apart the post-World War II order shaped by the US. He argues that the trend among emerging nations is still towards markets and some form of democracy.

In its presidential season, the US, far more than Australia, is caught with a political system unable to respond to challenges. The Obama-McCain contest is a cosmetic that conceals the nature of the US's difficulty. The downturn reflects problems in the financial system and the real economy.

For the US there is no easy solution to the structural forces driving oil, energy and financial markets. Yet much of the political debate remains in denial of these forces.

The task for the next president is to reform US economic and energy policy - to strengthen the US at home - and to conduct a foreign policy that recognises a more diverse world defined byinterdependence.

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