A Weblog of Centrist Voices in American Politics
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A Weblog of Centrist Voices in American Politics | |
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December 23, 2004China and OilSorry, I guess I am obsessed with politics. I promise, no more reading the paper until Sunday. These two articles, in the New York Times and the Washington Post, respectively, paint an interesting and disturbing picture of China's increasing need for oil and its willingness to pretty much do anything it needs to get it. http://www.washingtonpost.com/wp-dyn/articles/A21143-2004Dec22.html The Times article discusses China's interest in developing Canadian reserves that have become economically viable due to rising oil prices. This isn't really bothersome except that it shows how the global economy is beginning to put increasing pressure on what used to be our favored position in world trade. In addition, as China's demand for oil increases, pressure on oil prices will increase further. We were used to being pretty much the big fish in the pond in terms of importing oil. That's changing and we are not going to be able to take even the Canadians for granted (although they are hardly likely to turn off the spigot to the US). The days of cheap gasoline to which Americans seem to think they have a divine right are over. The bright spot is that higher oil prices are likely to make alternative fuel technologies more viable. The Post article is more disturbing. China has been working closely with the Sudanese government, exchanging arms for oil rights essentially. The effect has been, according to the article, to give China a huge stake in Sudanese production while at the same time giving the government the direct military aid and capital that it needs to build a military machine capable of quashing the rebels. This is the same Arab-dominated government, remember, that permitted the Arab tribes to attack the black African tribes. The Chinese funding has essentially permitted the government to push native peoples off the land in order to make way for oil drilling. Of course, the Chinese, who have a natural aversion to interfering in the internal affairs of other countries, especially when it comes to human rights. have helped the Sudanese government by threatening to veto UN resolutions against the government's actions. However, the Africans may have the last laugh. Under the proposed settlement to the Sudanese civil war, the rebels will control the south where much of the oil is. China may be about to find that its chickens are about to come home to roost: Ultimately, it may be peace that presents the Chinese firm with its greatest challenge. Under the terms of an agreement still being negotiated, oil contracts are supposed to remain secure. But three commanders of the southern Sudan rebel group said in interviews that the SPLA will seek to punish China once the rebels gain a formal decision-making role in the government. The stakes could be considerable: Peace would allow the world's major energy companies to enter Sudan's oil patch. Moreover, roughly two-fifths of all known reserves -- oil worth more than $16 billion -- are now in rebel-controlled territory, according to the study by PFC, the strategic analysis group. "The suffering of the people is on the hands of the Chinese," said commander Deng Awou. "The agreements for the Chinese company may be terminated." All in all, not a pretty picture unless you are one that believes the outside world should mind its own business and not interfere in civil wars. That's a defensible position, perhaps, but, in fact, the Chinese have effectively intervened here on the side of the government even though they try to deny they are doing anything but normal business. The US certainly does not have clean hands in terms of supporting repressive governments that are strategically or economically important. Still, the fact that the Chinese are so driven by economic necessity that they feel no compunction to consider the consequences of their actions is disturbing. These stories illustrate, IMO, that we are going to be increasingly faced with struggles over strategic resources, with oil being the most obvious examples. As the global economy expands, it is at these intersections of economics and politics where the US is going to face a lot of sticky issues, including how to balance our economic and resource needs with moral and political considerations. Not to mention how are we going to deal with countries like China and Russia that have their own strategic and political interests. Posted by Marc W. Schneider at December 23, 2004 02:43 PMComments
Seems like a pretty bogus pretense to maintain that you are exchanging weapons for oil and that this represents not interfering. The issue of increased Chinese demand for oil affecting the marker has bubbled up through the blogosphere over the last month or so. It's surely plainly logical over the long term that increased demand for a product with a finite supply eventually leads to scarcity and rising prices. When this actually happens and to what extent are less clear. in the near term, increased demand may be good news for OPEC nations because it means that they can increase production, and that they can more easily sell their dirtier crude since China has lower environmental standards and the US refinery capacity for some of this oil is currently maxed. All this is worth noticing, but, oil is still behaving like a commodity, and it's still a relative bargain once inflation is factored in. Other nations do have strategic interests, but they always have, and we still have more financial power, which is what means the most in a market situation. I'm not denying that this suggests more struggles over natural resources. I'm just not convinced that painful crises and shortages are inevitable even if international acrimony is. Posted by: bk at December 23, 2004 03:37 PMI understand China's economy is growing rapidly, with much foreign investment going there. But how high can oil prices go before the Chinese can't afford it? Is it correct to conclude they are still a developing economy with vast numbers of people living in extreme poverty? If this is the case, it would seem there is a limit to what the Chinese can eventually afford to pay. Posted by: tim at December 27, 2004 09:20 AMSeveral points. It's not what the Chinese can afford. The price of oil, like all products, is set by supply and demand. The more demand out there and the less supply, the higher the price. The Chinese, just like the US, have the pay the market price. (of course, strictly speaking, oil prices are not set by the "market" because OPEC is a cartel the fixes prices. If OPEC didn't exist, prices would probably be lower.) The point is that the more demand there is chasing supply, the higher the price will be. Now, OPEC (like any monopolist)is aware that at some point, prices can get to the point where they are too high and demand will decrease. (Although oil is considered to be extremely "inelastic", i.e., demand doesn't change very much in response to changes in price.) For example, during the 70s OPEC pushed oil prices to the point that it caused western economies to go into recession; with the recession and less economic activity, demand for oil slackened and ultimately, OPEC had to lower prices. (MOre precisely, OPEC is not setting prices, it is setting production, and the amount of supply vs. demand sets the price.) The point is that the more competition we face for oil, the higher the prices will be.
I'm not suggesting that that there will be wars over natural resources or that there will necessarily be shortages. I'm just saying that natural resources will be a factor in international relations in the future, perhaps more than ideology. For example, it's obviously going to be an issue with respect to dealing with Darfur. The Chinese, aside from their natural aversion to "interfering" in internal affairs, are not going to be willing to screw up their oil supplies (just as we aren't willing to screw up our relationship with Saudi Arabia to push democratization). That's the problem I have with the moralistic rhetoric that Bush (and, in fairness, other administrations, including Jimmy Carter)uses. We can talk about promoting democracy all we want, but when it gets right down to it, it's a matter of self-interest. If democracy benefits us, we will push it. If democracy doesn't benefit us or, if pushing it would cause problems, we don't push it. For example, Jimmy Carter was willing to push human rights with respect to Argentina, a country that had no strategic or economic importance to us, but he was not so willing to do that with respect to Iran. And there's no need to even address the obvious inconsistencies with Bush. That's not to say that moral considerations shouldn't factor into our foreign policy, but moralizing and purple rhetoric are counterproductive. We better realize that countries aren't going to appreciate it if we undermine their ability to obtain natural resources and build their economies any more than we appreciated Saddam Hussein trying to corner Middle Eastern oil. |
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