February 8, 2005
China and India are locked in an increasingly aggressive wrangle with the United States over the world's most critical economic commodity: oil. More than any other issue, this tussle will shape the economic, environmental and geopolitical future of these three countries, and the world.
Ensuring a steady flow of cheap oil has always been one of the central goals of U.S. foreign and economic policy, and Washington's pre-eminent position in the world is based in large measure on its ability to do this. But China and India are increasingly competing with the United States to secure oil exploration rights in Africa, Southeast Asia, Central Asia and Latin America.
India has invested more than $3 billion in global exploration ventures and has said it will continue to spend $1 billion a year on more acquisitions. China, which has already invested about $15 billion in foreign oil fields, is expected to spend 10 times more over the next decade.
The motive, says Zheng Hongfei, an energy researcher at the Beijing Institute of Technology, is that "there is just not enough oil in the world" to cover China's and India's growing energy needs.
With global oil production barely 1 million barrels over the global consumption rate of 81 million barrels a day, the surge in demand from China and India could eventually lead global demand to outstrip supply, causing fuel prices to shoot up beyond their recent highs of around $56 a barrel, says Roach.
In September, Michael Rothman, a senior energy analyst at Merrill Lynch, said rising oil prices were not so much a result of the Iraq war or political instability in Venezuela and Sudan, but of extensive "hoarding" by China.
According to Rothman's analysis, China and India are roiling oil markets by creating oil reserves, which are designed to provide the minimum cache the country needs to ride out a crisis, along the lines of the United States' Strategic Petroleum Reserve (SPR).
With both countries flush with foreign exchange reserves that are threatening to infect their economies with inflation, creating an oil stock seems a sensible solution. But critics say Beijing's and New Delhi's timing is unfortunate, coming just as the global economy seemed to be recovering and the United States was questioning the value of its own reserve.
At 175 million barrels and 25 million barrels respectively, China's and India's estimated oil reserves are just a small fraction of the 700 million barrels held by the United States in its SPR.
China and India, which are both nuclear states, are also taking advantage of the United States' strained ties with Iran, Vietnam and Myanmar by extending these countries military and political support in exchange for energy supplies. And a Washington preoccupied with Iraq, the war on terror and nuclear crises in Iran and North Korea has been unable to checkmate either country as successfully as it did earlier.
For example, U.S. nervousness over China's intentions in Latin America had led it to use its leverage with Panama to impede China's access to the all-important canal connecting the Pacific and Atlantic. But in December, Beijing signed a landmark deal with Venezuela and its neighbor Colombia, under whose terms a pipeline would be constructed linking Venezuelan oil fields to ports along Colombia's Pacific coastline. This will allow Venezuelan oil to bypass the Panama Canal and create a new and direct route to China.
There are also signs that China is warming to the idea of a Russia-China-India axis, which, in cooperation with Iran, would turn the oil-rich Central Asian region into their domain.
INTHESETIMES
China and India are locked in an increasingly aggressive wrangle with the United States over the world's most critical economic commodity: oil. More than any other issue, this tussle will shape the economic, environmental and geopolitical future of these three countries, and the world.
Ensuring a steady flow of cheap oil has always been one of the central goals of U.S. foreign and economic policy, and Washington's pre-eminent position in the world is based in large measure on its ability to do this. But China and India are increasingly competing with the United States to secure oil exploration rights in Africa, Southeast Asia, Central Asia and Latin America.
India has invested more than $3 billion in global exploration ventures and has said it will continue to spend $1 billion a year on more acquisitions. China, which has already invested about $15 billion in foreign oil fields, is expected to spend 10 times more over the next decade.
The motive, says Zheng Hongfei, an energy researcher at the Beijing Institute of Technology, is that "there is just not enough oil in the world" to cover China's and India's growing energy needs.
With global oil production barely 1 million barrels over the global consumption rate of 81 million barrels a day, the surge in demand from China and India could eventually lead global demand to outstrip supply, causing fuel prices to shoot up beyond their recent highs of around $56 a barrel, says Roach.
In September, Michael Rothman, a senior energy analyst at Merrill Lynch, said rising oil prices were not so much a result of the Iraq war or political instability in Venezuela and Sudan, but of extensive "hoarding" by China.
According to Rothman's analysis, China and India are roiling oil markets by creating oil reserves, which are designed to provide the minimum cache the country needs to ride out a crisis, along the lines of the United States' Strategic Petroleum Reserve (SPR).
With both countries flush with foreign exchange reserves that are threatening to infect their economies with inflation, creating an oil stock seems a sensible solution. But critics say Beijing's and New Delhi's timing is unfortunate, coming just as the global economy seemed to be recovering and the United States was questioning the value of its own reserve.
At 175 million barrels and 25 million barrels respectively, China's and India's estimated oil reserves are just a small fraction of the 700 million barrels held by the United States in its SPR.
China and India, which are both nuclear states, are also taking advantage of the United States' strained ties with Iran, Vietnam and Myanmar by extending these countries military and political support in exchange for energy supplies. And a Washington preoccupied with Iraq, the war on terror and nuclear crises in Iran and North Korea has been unable to checkmate either country as successfully as it did earlier.
For example, U.S. nervousness over China's intentions in Latin America had led it to use its leverage with Panama to impede China's access to the all-important canal connecting the Pacific and Atlantic. But in December, Beijing signed a landmark deal with Venezuela and its neighbor Colombia, under whose terms a pipeline would be constructed linking Venezuelan oil fields to ports along Colombia's Pacific coastline. This will allow Venezuelan oil to bypass the Panama Canal and create a new and direct route to China.
There are also signs that China is warming to the idea of a Russia-China-India axis, which, in cooperation with Iran, would turn the oil-rich Central Asian region into their domain.
INTHESETIMES
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