Will the US and China Be Locked in a Global Battle Over Oil?

If you want to know which way the global wind is blowing (or the sun shining or the coal burning), watch China.  That’s the news for our energy future and for the future of great-power politics on planet Earth. Washington is already watching -- with anxiety.

Rarely has a simple press interview said more about the global power shifts taking place in our world.  On July 20th, the chief economist of the International Energy Agency (IEA), Fatih Birol, told the Wall Street Journal that China had overtaken the United States to become the world’s number one energy consumer.  One can read this development in many ways: as evidence of China’s continuing industrial prowess, of the lingering recession in the United States, of the growing popularity of automobiles in China, even of America’s superior energy efficiency as compared to that of China.  All of these observations are valid, but all miss the main point: by becoming the world’s leading energy consumer, China will also become an ever more dominant international actor and so set the pace in shaping our global future.

Because energy is tied to so many aspects of the global economy, and because doubts are growing about the future availability of oil and other vital fuels, the decisions China makes regarding its energy portfolio will have far-reaching consequences.  As the leading player in the global energy market, China will significantly determine not only the prices we will be paying for critical fuels but also the type of energy systems we will come to rely on.  More importantly, China’s decisions on energy preferences will largely determine whether China and the United States can avoid becoming embroiled in a global struggle over imported oil and whether the world will escape catastrophic climate change.

How to Rise to Global Preeminence

You can’t really appreciate the significance of China’s newfound energy prominence if you don’t first grasp the role of energy in America’s rise to global preeminence.

That the northeastern region of the young United States was richly endowed with waterpower and coal deposits was critical to the country’s early industrialization as well as to the North’s eventual victory in the Civil War.  It was the discovery of oil in western Pennsylvania in 1859, however, that would turn the U.S. into the decisive actor on the global stage.  Oil extraction and exports fueled American prosperity in the early twentieth century -- a time when the country was the planet’s leading producer -- while nurturing the rise of its giant corporations.

It should never be forgotten that the world’s first great transnational corporation -- John D. Rockefeller’s Standard Oil Company -- was founded on the exploitation and export of American petroleum.  Anti-trust legislation would break up Standard Oil in 1911, but two of its largest descendants, Standard Oil of New York and Standard Oil of New Jersey, were later fused into what is now the world’s wealthiest publicly traded enterprise, ExxonMobil.  Another descendant, Standard Oil of California, became Chevron -- today, the third richest American corporation.

Oil also played a key role in the rise of the United States as the world’s preeminent military power.  This country supplied most of the oil consumed by Allied forces in both World War I and World War II.  Among the great powers of the time, the U.S. alone was self-sufficient in oil, which meant it could deploy massive armies to Europe and Asia and overpower the well-equipped (but oil-starved) German and Japanese militaries.  Few realize this today, but for the architects of America’s victory in the Second World War, including President Roosevelt, it was the nation’s superior endowment of petroleum, not the atom bomb, that proved decisive.