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

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Having created an economy and military establishment based on oil, American leaders were compelled to employ ever more costly and desperate measures to ensure that both always had an adequate supply of energy.  After World War II, with domestic reserves already beginning to shrink, a succession of presidents fashioned a global strategy based on ensuring American access to overseas petroleum.

As a start, Saudi Arabia and the other Persian Gulf kingdoms were chosen to serve as overseas “filling stations” for U.S. refiners and military forces.  American oil companies, especially the descendants of Standard Oil, were aided and abetted in establishing a major presence in these countries.  To a considerable extent, in fact, the great postwar strategic pronouncements -- the Truman Doctrine, the Eisenhower Doctrine, the Nixon Doctrine, and especially the Carter Doctrine -- were all tied to the protection of these “filling stations.”

Today, too, oil plays a critical role in Washington’s global plans and actions.  The Department of State, for example, still maintains an elaborate, costly, and deeply entrenched military capability in the Persian Gulf to ensure the “safety” and “security” of oil exports from the region.  It has also extended its military reach to such key oil-producing regions as the Caspian Sea basin and western Africa.  The need to retain friendly ties and military relationships with key suppliers like Kuwait, Nigeria, and Saudi Arabia continues to dominate U.S. foreign policy.  Similarly, in a globally warming world, a growing American interest in the melting Arctic is being propelled by a desire to exploit the polar region’s untapped hydrocarbon reserves.

Planet Coal?

The fact that China has now overtaken the United States as the world’s leading energy consumer is bound to radically alter its global policies, just as energy predominance once did America’s.  No doubt this will, in turn, alter the course of Sino-American relations, not to speak of world affairs.  With the American experience in mind, what can we expect from China?

As a start, no one reading newspaper business pages could have any doubt that Chinese leaders view energy as a -- possibly the -- major concern of the country and have been devoting substantial resources and planning to the procurement of adequate future supplies.  In addressing this task, Chinese leaders face two fundamental challenges: securing sufficient energy to meet ever-rising demand and deciding which fuels to rely on in satisfying these requirements.  How China responds to these challenges will have striking implications on the global stage.

According to the most recent projections from the U.S. Department of Energy (DoE), Chinese energy consumption will grow by 133% between 2007 and 2035 -- from, that is, 78 to 182 quadrillion British thermal units (BTUs).  Think about it this way: the 104 quadrillion BTUs that China will somehow have to add to its energy supply over the next quarter-century equals the total energy consumption of Europe and the Middle East in 2007.  Finding and funneling so much oil, natural gas, and other fuels to China is undoubtedly going to be the single greatest economic and industrial challenge facing Beijing -- and in that challenge lays the possibility of real friction and conflict.

Although most of the country’s energy funds are still expended domestically, what it spends on imported fuels (oil, coal, natural gas, and uranium) and energy equipment (oil refineries, power plants, and nuclear reactors) will significantly determine the global price of these items -- a role that, until now, has been largely filled by the United States.  More important, however, will be the decisions China makes about the types of energy it will come to rely on.