Russia's presidency of the G8 has certainly started with a bang. Vladimir Putin had barely taken over from Tony Blair on January 1 before he was turning off gas supplies to Ukraine in a row over the price of energy.

Putin received thunderous condemnation for this decision. Commentators vied to find the right words to describe this display of old-style Moscow muscle. It was quite outrageous that Russia should bully Ukraine, punishing Kiev for daring to go against the Kremlin's wishes in last year's Orange Revolution.

Of course, Putin's argument that he was simply asking Ukraine to pay a market price for its gas was spurious. Belarus - a client state of Moscow - is continuing to get its gas at the hugely subsidised price of $50 (£28) per 1,000 cubic metres, and increases for the Baltic states and Moldova are being phased in over time (as will Ukraine's, now the two sides reached an agreement). There was an element of spite in Putin's action; no doubt about it. The message was clear: don't mess with me.

But for the west to raise its hands in horror is utter humbug. The implication is that Britain, France and the US never reward friendly countries nor punish those they believe have stepped out of line. As Paul Robinson noted in last week's Spectator, Egypt is seen as a friend of the west in the Middle East and gets plenty of financial help; Syria is no friend of Washington and receives less generous treatment. "Putin's policy certainly represents a very crude pursuit of national interest, implemented unilaterally and with little regard for international opinion. But, as such, it is not so very different from the sort of policies pursued by other states, including our own. Furthermore, the marketisation of energy policy which it involves is entirely in keeping with the demands that European states have been making of Russia for several years."

Quite. If Putin has decided that the way to secure global influence is to throw his weight around, who can blame him? That's what everybody else does. And given Moscow was crawling with neo-liberal zealots in the aftermath of the collapse of the Soviet Union in 1991 insisting a dose of unrestrained market forces was just what the doctor ordered, it must be amusing for Putin to be able to say: "What, me? I'm only doing what the market tells me I should."

In this case, the market-forces argument carries some clout. Energy prices are high globally because demand is strong and there are justifiable concerns about supply in the short and medium-term. It is absurdly wasteful and damaging to the environment for the Russians to sell gas at subsidised prices. From the perspective of anybody concerned about global warming, the idea that Ukraine should be receiving gas at one-fifth of the price it costs in western Europe and an eighth of what it costs in the US is the economics of the madhouse.

Vulnerable

In the event, last week's standoff was quickly settled. Fears that the European Union could see supplies affected proved groundless, at least on this occasion. Europe's vulnerability is that it receives a quarter of its natural gas from Russia, with Hungary, Austria and the Czech Republic especially vulnerable, as most of it arrives via a pipeline that crosses Ukraine. When Russia reduced the gas by the amount it normally supplies to Ukraine, there was nothing to prevent the Ukrainians from siphoning off some for themselves, leaving Europe short.

That was never seriously going to happen. This is the first time Russia has held the presidency of the G8, a club of which it is not really eligible to be a member. It is not as pivotal to the global economy as China, India or Brazil, nor is its democratic governance anything to write home about. The only reason Russia is a member is because it is sitting on the world's biggest reserves of natural gas, so Putin moved quickly to assuage fears in Europe that supplies might be affected by his local dispute. While appearing to revel in his image as a strong man, he is not daft enough to alienate the rest of the G8 in such a crass fashion.

That said, Putin has made his point and the G8 will get the message. At one level, the dispute reflects the fact that the G8 will have a different focus this year. Tony Blair and Gordon Brown would like to see some follow-through from Britain's presidency, where the emphasis was on Africa, but Putin is clearly far more interested in energy security. With oil prices above $60 a barrel and reserves of fossil fuels concentrated in parts of the world notable for their political instability, it is reasonable to assume Britain will struggle to keep development high on the agenda.

If Putin forces Blair and Brown to focus on the idiotic nature of government policies on energy and climate change, that would be no bad thing. Labour's new year bombshell was the news that it plans to give the go-ahead for a third Heathrow runway, a decision which can only be justified on the basis that growth is more important than climate change. Having created the conditions for more global warming, the government thinks it can square the circle by building more nuclear power stations to cut down on the use of fossil fuels.

Concerns

Given Britain's appalling record on energy efficiency, a better idea might be to look at California, where tough state regulations have had a considerable impact on consumption. Arthur Rosenfeld, energy commissioner for California, told a conference last year that avoiding the 50% expansion in electricity use over the past 25 years was equivalent to getting 12 million cars off the road.

Unsurprisingly, concerns about the British government's energy policy are growing, inside and outside parliament. Labour backbencher Colin Challen has introduced a bill calling for the contraction and convergence method for tackling climate change to be enshrined in law. There is not much hope that the government will adopt his bill, but it should. C&C involves reducing greenhouse gases to a sustainable level over the next few decades (contraction) and over the same period arriving at a situation where everybody on the planet has an equal right to pollute (convergence). It is simple, it is radical and it is the best - perhaps the only - idea around that offers a solution to climate change.

Instead, we're scrabbling around looking for a quick fix - urging Opec to pump more oil, building more nuclear power stations, occupying Iraq - in the hope that there is a magic solution to the problem of ever-rising demand and limited supply. There isn't. Russia's skirmish with Ukraine will be merely the foretaste of bigger and nastier conflicts over energy unless it is recognised that the party is over and the days of cheap oil and gas are gone for good.