SPEAKING FREELY The oil that troubles
US-China waters By Travis Tanner
Speaking Freely is an Asia Times Online
feature that allows guest writers to have their say.
Please click hereif you
are interested in contributing.
Early
this month, crude oil futures prices peaked at a 21-year
high, reaching US$42.45 a barrel. In conjunction with
terrorist risk premiums, China's surging demand for oil
is a major driver behind the soaring prices. In fact,
since the beginning of 2000, China has accounted for 40%
of the growth in world oil demand.
Oil is an
essential ingredient in China's successful formula for
economic growth. It is critical for driving industrial
activity, generating power, constructing infrastructure
projects and fueling the rapidly growing number of
automobiles on China's roads. Today, imports comprise
one-third of China's total oil consumption, growing 31%
last year, and by 2020 some estimates put China's
dependency on foreign oil as high as 70%.
Oil
consumption in the United States, the world's largest
consumer of petroleum, is expected to grow nearly 50%
over the next 20 years. Beijing, also on the fast track
to oil dependency, is on a search to secure energy
sources across the globe. This quest, in addition to
China's heavy reliance on Middle Eastern oil, suggests a
potential rivalry between the US and China over access
to oil-rich regions. Many analysts argue that the
trajectories of the world's two most voracious oil
consumers will inevitably lead to a clash over the
scarce resource.
Will the US and China actually
square off in a war for resources some time during the
first half of the century? Although the idea for a
coming collision over the world's limited oil reserves
may sound rather intriguing, several essential
considerations must be examined before drawing such a
conclusion.
First, until recently, China's
energy strategy has appeared disjointed, often fixed on
multiple, mutually exclusive objectives and quite often
designed to meet political ends at the expense of
economic considerations. However, as a result of
instability in the Middle East and the need to maintain
economic growth as a means to achieve social stability,
Chinese authorities have recently approached the
nation's energy policy in two fundamentally new ways.
Foremost, Beijing has embarked on a
diversification strategy both in terms of the
development of alternative fuels and the establishment
of new oil-import markets.
For example, Beijing
recently moved to solicit bids on four newly proposed
nuclear power reactors from international organizations,
increased oil imports from Central Asia, Russia and
Africa and is constructing three large liquefied natural
gas projects along the Chinese coast.
The other
major policy swing is one toward an energy strategy
based on market principles as opposed to political
considerations. One example that clearly illustrates
Beijing's shift is the recent decision to move forward
on construction of the Kazakhstan-China oil pipeline. In
1997, at the time the original agreement was made, the
3,000-kilometer pipeline from Kazakhstan to China made
little commercial sense. Instead, the deal was part of
Beijing's strategic efforts to partner with Central
Asian nations to protect against potential
pro-independent uprisings along the Xinjiang boarder and
to counter growing US presence in the region. In fact,
after seven years, only the first 400 kilometers of the
pipeline have been completed. The recent push to
complete the second, much larger, section of the project
demonstrates Beijing's latest yearning to lock in new
energy supplies and diversify away from Middle Eastern
oil.
Second, technological advances in the oil
industry and the development of alternative energy
sources will allow, over time, energy users to become
more efficient and decrease their overall reliance on
oil. No one knows when Earth's remaining oil deposits
will dry up, but almost all experts agree that before
mid-century the world's oil supply will "peak" - marking
a change from an increasing supply of cheap oil to a
dwindling supply of expensive oil. Therefore, the
technological advances required to shift away from oil
reliance toward substitutes such as natural gas, hydro
power, biomass and other renewables are not only welcome
but necessary. In the future, when the cost of
developing and utilizing alternative energy sources
equalizes with the cost of oil use, simple economics
will drive rapid progress in these areas. Oil dependency
will decline as it becomes more economical to take
advantage of alternative energy sources.
The
third factor to be contemplated when analyzing the
likelihood of a future US-Sino oil clash is the dynamic
relationship these two powers share. Since dialogue
began in the early 1970s, progress on strategic,
political, cultural and commercial levels has flourished
and resulted in a very strong, mutually beneficial
relationship. The large number of shared interests not
only provides incentives for avoiding a showdown over a
single limited resource, but also provides multiple
spheres in which cooperation and diplomatic arrangements
can be worked out. In fact, last month the two nations
agreed to launch the US-China Energy Policy Dialogue,
which will expand energy-related interactions and
cooperation between the world's two largest energy
consumers.
Will growing demand for oil sour the
US-China relationship to such a degree that a collision
is inevitable? China's newly evolving energy strategy,
technological progress in the oil industry and the
increasingly robust bilateral relationship make this
claim unlikely.
Speaking Freely is an Asia
Times Online feature that allows guest writers to have
their say. Please click hereif you
are interested in contributing.
Travis Tanner is the assistant
director of Chinese studies at the Nixon Center in
Washington, DC. Prior to this, he worked as a research
assistant at the Institute for International Economics.
He attended both the Johns Hopkins School of Advanced
International Studies (SAIS) and the Hopkins-Nanjing
Center in Nanjing, earning a master's degree in
international relations. He has a bachelor of arts in
Chinese language from the University of Utah.
