We hold these truths to be self-evident, that all men are created equal, that they are endowed by their Creator with certain unalienable Rights, that among these are

Life, Liberty and the pursuit of Happiness.

That to secure these rights, Governments are instituted among Men, deriving their just powers from the consent of the governed,

Sunday, September 09, 2007

Advantage: China

By Kevin Kerr

It seems like a weekly occurrence that another deal is struck between China and another key energy-producing country. Meanwhile, U.S. relations with those countries continue to erode.

The countries that will likely be the "energy elite" in the coming 50 years certainly don't include the United States. In fact, the U.S. isn't even on the guest list. Meanwhile, America is losing its "preferred customer" status with many oil producing nations. Now the U.S. is seen as a third-rate customer that is taking a back seat to China and others.

As Chinese officials jet around the globe cutting supply deals with oil producers in Russia, Venezuela and various Middle Eastern countries, the world's oil supply lines are being locked up. And that's not the only problem. Some of the world's most prominent oil exporters are thumbing their noses at the U.S.
"The United States, as a power, is going down and China is going up," says Hugo Chavez, the president of Venezuela. "China is the market of the future."

Chavez was speaking in Caracas when he said that Venezuela will diversify its oil exports to ease dependence on the U.S. market. Historically, Venezuela has shipped about 1.5 million barrels a day. Chavez announced again that Venezuela's goal is to boost oil exports to China to 1 million barrels a day by 2012, from about 150,000 barrels today. Guess where all that oil will come from.

Even more distressing is that as Chavez now nationalizes every aspect of the country, especially projects that had significant U.S. investment, he announces that Venezuela and China plan to form joint ventures to drill in the South American county's heavy crude belt and even build three refineries, all for oil for export to China.
The venture was announced between the state-run oil company Petroleos de Venezuela SA and China National Petroleum Corp. The partnership deal may also include building tankers to ship the Venezuelan crude to China.

China has struck similar deals with Russia in recent months, as well as with a couple of Africa nations. All of this activity is vital to Chinese interests and its economy's increasing reliance on fossil fuels.

Just a decade ago, there were almost no privately owned cars in China. Fast-forward to 2005 and there were almost 24 million. It's hard to imagine, but China now has more car brands than the United States. The Chinese car market has just surpassed Japan and is now the second largest market in the world, after the United States. Some analysts estimate another 20-25% growth in 2007.

While China is busy striking strategic oil partnerships around the globe, the U.S. is still mired in problems with Iraq, and now even facing possible conflict with Iran. With no clear energy policy being presented by any presidential candidate, it seems as though the U.S. will continue to be pushed aside in the ongoing deal making and strategic oil alliances. All of this bodes very badly for energy prices going forward, as the situation is likely to get much worse before it gets any better. At a time when the U.S. should be encouraging more global partnerships and foreign investment, the opposite seems to be happening.

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