It seems to me that extra gravitational potential energy is created as the universe expands and the distance between massive objects such as galaxy clusters increases; this implies that energy is not conserved in the universe. Is that right?
That's actually a tricky question.
The short answer to the title question is yes, it does. But the answer to the follow up question about conservation is, it is still conserved.
In a much simpler universe, what hwlau said would be true - as the gravitational potential energy increases, the kinetic energy decreases. But we do know through the Hubble telescope that this is not the case. As the universe expands, the planets and dust and stars accelerate away from each other.
The answer is only hypothetical for now, which is dark energy. Here's the wikipedia page on it. The problem is, dark energy is very unknown. I'm not sure how this force will be able to counteract gravity. However, dark energy only manifests itself through gravity, and not through the other 3 fundamental forces, so there is definitely some relationship there. Dark energy can possibly negate the increased potential energy through some mechanism, but how it does that exactly is also unknown.
There's little I can give you other than the wikipedia link above, but notice when you open it, how the only explanations available are evidence arguing for dark energy's existence, what properties it should have, and other explanations for the expansion aside from dark energy (very interesting part). There is no explanation as to its mechanism, except that it causes things to accelerate against each other.
It's a good question. There is simply no good, accurate answer at the moment.
Here is an extract from this article on math.ucr.edu that explains why energy sometimes seems to be not "conserved".
I figured it would be better if I copy the entire paragraph and post it as answer (so that others can see) instead of providing the link as comment because you never know when the server might go down and the article would be lost.
Click here to read four examples and plunge deeper into the mathematics. Three examples involve redshift; the other, gravitational radiation.
I think your reasoning is partially correct.
Yes, the Universe is expanding. But, the energy is conserved. How?
From the second law of thermodynamics, $$ dG = dH-TdS $$ Taking our universe as a closed system. And, our universe does not exchange heat with the surroundings (well, there are no one to exchange).
As our universe is expanding, $dS$ increases. Therefore, $-TdS$ decreases. Hence, $dG$ decreases. The energy for the universe to do a work (can be seen as potential energy) is lost in expansion. As the potential energy of the universe is decreasing, it can be seen as Gravitational Potential Energy + Internal Energy (of Masses) + Electro Magnetic Radiation. The mass is conserved (for large objects (principle of momentum during collisions)), Radiation remains constant. The major change occurs in Gravitational Potential Energy. And, it decreases as $dG>0$
The problem with this question is that gravitational potential energy between massive objects is a Newtonian concept but the question of energy conservation in cosmology can only be discussed properly in terms in general relativity.
The general answer is that energy is always conserved if you take into account the energy in the gravitational field as well as the matter and radiation fields. Dark energy can also be accounted for.
The full treatment is long and gets technical so I refer to my article at http://vixra.org/abs/1305.0034
The answer in the Physics FAQ above is incorrect and the points raised are treated in my article
Your reasoning is not right. Energy can still conserved even expansion occurs.
Considering the simplest case that there are only two massive particles moving away from each other. As the distance increase, the potential energy increase while the kinetic energy decrease. Hence, the speed is slowing down, but they are still moving away from each other (expanding).
For large among of particles, you can also think of some kind of explosion driving them away from each other. The expansion is slowing down as time pass, but they are still expanding. There is no need for "creation of extra potential energy". To claim that the energy is not conserved, you need more evidences such as the speed distribution, etc.