November 29, 2004

November 29, 2004 | Commentary on Energy and Environment

Oil Obsession

If you think gas prices are through the roof now, beware the advent of the Chinese family car.

No kidding: Growing prosperity will produce literally hundreds of millions of middle-class, energy-hungry (car-driving) Chinese over the next 20 years - launching gas prices into outer space.

China's energy use is already growing by leaps and bounds. It now ranks No. 2 in world energy consumption (behind the United States, ahead of Japan), and is a major cause of rising energy prices.

Beijing's growing needs will have significant ramifications on everything from international security to global pollution. As major powers scramble to secure limited world energy resources, conflict is certain - and armed conflict isn't out of the question.

Look at oil: Within 20 years, China is expected to burn as much as America. But the Asian giant's oil reserves will be depleted in as few as 14 years.

Once a net exporter of oil, China now imports 60 percent of its needs. It's oil imports: a) have doubled over the past five years; b) surged nearly 40 percent in the first half of 2004 alone; c) account for one-third of the growth in world demand and; d) grow by 7.5 percent per year - seven times faster than the U.S.

Small wonder that China is scouring the earth's four corners for energy. Chinese oil comes from the Middle East (Saudi Arabia and Iran), Africa (Sudan and Angola), Southeast Asia (Vietnam and Indonesia) and Russia. In the future, it'll come from Latin America (Venezuela, Argentina and Brazil) and Central Asia (Uzbekistan and Kazakhstan) as well.

The People's Republic must keep the energy coming, at an ever-higher rate, to maintain its breakneck economic growth, which averaged 9 percent annually over the last 25 years. And a continued boom is needed to: tamp down growing political dissent by improving living standards; finance its robust military buildup and increase its international influence.

But there are other big issues at stake as well:

* Prices: China's growing oil consumption will likely keep gas prices sky high, potentially damping world economic growth. World oil demand (of 70-80 million barrels a day) has been bumping right up against production capacity.

Oil price hikes have been driven by demand growth - not drops in production. And worldwide demand for the remaining 3 trillion barrels is expected to grow 50 percent over the next 25 years.

* Competition: Increasing demand will tighten competition for energy resources. This contest may be friendly - or not.

For instance: China's growing energy appetite has heightened tensions in Asia, particularly for Sino-Japanese relations. Japan, the world's No. 2 economy and historical Chinese rival, is competing with China for access to resources, especially in Russia.

Anyone notice the Chinese sub incursion into Japanese waters a few weeks back? It happened just inside Japan's territorial waters, adjacent to where China recently began drilling for gas.

China's increasing reliance on Iranian energy, including a recent $70 billion oil/gas deal, may hamper efforts to curb Iran's nuclear (weapons) program. Beijing has come out firmly against taking Tehran to the U.N. Security Council over its nuclear transgressions, protecting Iran from possible economic sanctions. One big reason: The mullahs supply 13 percent of China's energy needs.

And while the United States tried to get the United Nations to move against the genocide in Sudan, China quietly worked to defang key U.N. resolutions. China's angle? Protecting the source of 7 percent of its oil and a $3 billion Chinese investment in Sudan's oil industry.

* Pollution: Though still a developing economy, China already ranks as the world's No. 2 greenhouse gas producer. And its ongoing economic boom will put more and more of China's 1.2 billion people in the driver's seats of carbon monoxide-producing cars.

Making matters worse, China is the world's top consumer and producer of coal. It burns up 27 percent of the world's total production, spewing tons of pollutants into the air from old, inefficient state-owned factories.

In short order, the People's Republic will be the world's largest polluter. Yet its government is just starting to look seriously at environmental protection.

China's insatiable energy appetite will become an increasingly dominant factor in Beijing's foreign-policy choices. As with Iran's nuclear program, this will often put Beijing at cross-purposes with other world powers.

Beijing desires to be viewed as a responsible, major power. It won't be taken seriously if China continues to turn a blind-eye to wide-ranging problems in an effort to quench its thirst for energy in places like the Sudan.

If it ignores international norms, serious diplomatic and economic confrontations between China and the international community are even more likely. Energy security and international responsibilities aren't mutually exclusive.

Peter Brookes is a Heritage Foundation senior fellow. E-mail: peterbrookes@heritage.org

About the Author

Peter Brookes Senior Fellow, National Security Affairs
Douglas and Sarah Allison Center for Foreign and National Security Policy

First appeared in the New York Post