If Unocal Corp. accepts an $18.5 billion takeover by China's CNOOC Ltd. the deal's fate may hinge on how a secretive U.S. review panel defines "national security," experts said on Friday.
"The primary question for this transaction is whether they consider energy security to be a national-security issue," said Michael Wessel, a Democrat and a member of the U.S.-China Economic and Security Review Commission.
Wessel said the Bush administration, so far, had restricted the definition of national security.
State-owned CNOOC's unsolicited bid trumped a roughly $16.4 billion offer from Chevron Corp. and coincides with record oil prices, unease over China's $160 billion trade surplus with the United States and concerns about its growing military might.
Of course, this is no surprise to anyone who's been paying attention; indeed, some of our best and brightest have been wargaming some pretty scary energy scenarios.
When the exercise's planners first met last year, oil was in the $40-a-barrel range. As they fantasized where oil prices would be for the war game's start in an imagined late 2005, they said, they set them at $58 but worried they were being absurdly pessimistic. Yesterday, the closing price for a barrel of oil was $59.42.
The war game players also referred several times to other real-life events of today. A major feature of the exercise was how China's voracious appetite for oil is driving up world prices, and only yesterday it was announced the Beijing government, in a bold and unprecedented act, is bidding to buy the U.S. oil company Unocal.
Consider the financial and geopolitical ramifications of all this. Right now, we are essentially borrowing money from China so that we can buy more shit from them. What did we think they were going to do with the huge influx of capital? A whole new class of Chinese citizens is on the rise, looking across the Pacific at us and our conspicuous-consumption lifestyle. Naturally, they want some of that, starting with cars.
So they're buying lots of cars from us (or having us help them manufacture them), and the Chinese government has been proactive in securing access to oil deposits around the world. Unocal provides East Asia with most of its oil already anyway, so such an acquisition probably wouldn't affect US oil supply in the near term. But defining "near term" is even less of an exact science than it was just a year or two ago.
The balance between oil supply, demand, and current production and refinement capacity is, to say the least, precarious. We should have started an Apollo-style great project years ago to offset such an occurrence, and John Kerry made mention of it early on in his presidential run, before he suddenly became politically viable in the wake of Howard Dean's so-called Iowa implosion. At that point, Kerry could no longer be bothered with saying what he actually thought, and was forced to tack to the right, mewling and sputtering all the way, since that is what ill-informed and reflexively dyspeptic NASCAR dads needed in order to affirm their own place in the scheme of things.
Of course, there is the breed of alternative-energy fantasist which assumes that we can wean ourselves entirely off the oil teat. This is not true. We can and must take several important steps toward doing so, but it will take more than just stepping up investment in photovoltaic technology and such. Centralized mega-agriculture relies most heavily on the oil economy, particularly in terms of transporting food all over the country. Localizing and regionalizing agricultural production and distribution would help immensely, of course, but how likely is that to happen?
Also, Americans would have to completely rethink their leisurely relationship with the automobile, the romanticized vision they have of themselves and their vehicles. It all starts with the biggest, most wasteful SUVs, but really all cars and trucks across the board are simply going to have to be more sensibly used.
It's nice that Priuses and hybrids are flying out of showrooms as fast as they can be manufactured, but unless it's in conjunction with the Hummer/Excursion idiots taking even small steps to re-examine their transportation needs (as opposed to wants) and mitigating the horrendous externalities their gas-guzzling turds inflict on everyone else, hybrids are just a stopgap. The first step in sensible resource management, before even researching alternative technologies and renewable sources, is to confront the consumption paradigm.
So now we begin a rather dangerous chapter in the Great Game played by great powers, that of dodging each others' attempts at encirclement. Militarily, we have the upper hand on China right now, especially in terms of deep-water fleets, which China inexplicably has very little of.
Financially, though, they've got us by the short hairs, and even a slight tug could send our precarious consumer economy reeling. Furthermore, we are put in the rather hypocritical position of countering our own long-standing globalization gospel. The globo high priests are suddenly finding themselves on the road to Damascus, because China has found an advantageous use of the rules we imposed on the rest of the world.
SF Chronicle economics columnist Alan Saracevic gets it, and riffs volubly on the subject:
For years, American business told us that shipping jobs overseas is a good thing. Even if you lose your job, don't sweat it. The stuff down at Wal- Mart will be a lot cheaper. Never mind that you have no money or health care, think about how cheap those flip-flops from Asia are.
Of course, it made absolutely no sense all along. If we have no jobs, how are we supposed to maintain a robust consumer class? How come we're not sending any executive jobs to India? How come you're getting richer and I'm getting poorer?
....
The great, great irony here, as my colleague Sam Zuckerman pointed out many times this week, is that all this economic muscle in China is a direct result of our trade policy. Simply put, the money we spend at Wal-Mart on those cheap flip-flops goes back to China. They need to recycle those dollars into investments.
While they've been happy investing that money in U.S. Treasury notes for years, it looks like 4 percent returns aren't going to cut it any more. They wanna be real capitalists, in the allegedly real markets.
But apparently many of our fearless, and clueless, leaders in business and politics are not ready to make globalization a two-way street.
He's exactly right. In our ridiculous electoral efforts to concentrate on the clear and present threat of homosexuals marrying hither and yon, we have allowed these hucksters to pick our pockets, line their own, and sell us all down the river.
We should indeed think twice about selling American oil companies to Chinese state-run interests, but the problem is that we have painted ourselves into a major corner here. We can't afford to piss them off; if they really want Unocal, there's not a hell of a lot we can do about it, not with them pulling the financial strings.
We have made it this far mainly because we have heretofore held the rather unique position of being "too big to fail"; that is, the rest of the world knows that if we were to go down, we'd suck most of the rest of them down with them. So they have been helping, but they have also quietly been working toward the time when the level of interdependence is more equalized.
Despite the recent blips in Euro unity, their currency still holds strong, and stands a good chance of overtaking the dollar as the global standard. Latin America is ascendant, both in terms of political unity and as a trade bloc; Africa will eventually get its act together and do likewise. Korea will eventually reunify, once the nauseating Kim regime collapses under its own weight in the North, and Korea will take its place right next to a remilitarizing Japan and a dominant China as a real force in the world economy, since all trends point toward East Asia anyway. If they can't work with us, they'll just continue cultivating the rest of the world as a market.
All the neocon fantasies about democratizing the cultural backwaters that happen to hold the majority of proven oil reserves can't change one simple fact: there is no question as to whether or not we will eventually run out of oil -- the only real question is whether we have the collective will to wean ourselves off it in a relatively painless way now, by examining the modes of consumption, distribution, and access, and taking proactive steps to eliminate the more egregious and stupid forms of waste; or if we're just going to keep dicking around until oil hits $100 per barrel and we're forced to do it on the backs of the people at the bottom of the social ladder.
So far, there's really not much of a question there, either.
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