Book Reviews | Gordon Campbell | News Flashes | Scoop Features | Scoop Video | Strange & Bizarre | Search

 


U.S. Govt. Should Stop Meddling in the Oil Market

The U.S. Government Should Stop Meddling in the Oil Market


July 1, 2005
by Ivan Eland
From: http://www.independent.org/newsroom/article.asp?id=1532

U.S. national security bureaucracies, some members of Congress, and their special interest supporters are eagerly demonizing the next “insidious” enemy: China.

Hawks and protectionists have seized on a bid by the primarily state-owned China National Offshore Oil Corporation (CNOOC) to take over California-based Unocal Oil. They allege that China could use the acquisition to meddle in oil pricing or even withhold supplies from the United States. U.S. officials have admitted heartburn over a communist-run corporation owning a major U.S. oil company.

But ironically those communists—now in name only—are trying to teach U.S. government bureaucrats and their protectionist pals in the “land of the free and the home of the brave” something about economic freedom and unfettered markets. According to Chinese Foreign Ministry spokesman Liu Jianchao, “The economic cooperation between China and the U.S. serves the interests of both sides. The bid by CNOOC for Unocal is a normal commercial activity between enterprises. We think that these commercial activities should not be interfered in or disturbed by political elements.”

The U.S. national security bureaucracies, dependent on public fears of oil shortages or high prices to maintain the flow of tens of billions of dollars into their agency coffers, have long had a vested interest in ignoring the fact that the worldwide oil market would function well without their meddling. For example, the key producers in that market, Saudi Arabia and the other oil-rich states surrounding the Persian Gulf, actually need to export their oil more than the West needs to buy it. Most of them have little else to export to earn much-needed foreign exchange. These producers have few incentives to withhold supplies from the United States or anyone else. Even if they did, the United States would buy oil from other oil producers around the world and the embargoing Persian Gulf country or countries would have to sell to the former customers of those other producers—that is, the market would simply reorder as it did during the OPEC oil embargo against the United States and the Netherlands in 1973. Furthermore, the producers know that if the price of oil goes too high, the demand for their product could be permanently damaged by new energy technology and alternative fuels then made economical. Thus, in the long-term, even the Persian Gulf oil heavyweights have far less market power than is attributed to them by the conventional wisdom.

If the market power of the Persian Gulf producers is restricted, that of a Chinese-owned Unocal is miniscule. In fact, Unocal’s total petroleum production is equivalent to only a small portion of U.S. consumption. The Chinese government wants Unocal’s oil fields, which are mainly in Asia (70 percent) and the Caspian Sea, to provide energy security for an accelerating economy. (Ironically, if the governments of Asia and the Caspian Sea had originally blocked Unocal’s investments in their countries for “national security” reasons, Unocal might not be as seemingly important to the U.S. government now.) The global oil market makes the Chinese governmental pursuit of energy security unnecessary, and the United States shouldn’t fall into the same quixotic quest.

Even if China decided that all of Unocal’s production would be exported back to China, this decision would reduce Chinese purchases from other world producers and thus free up oil to sell to Unocal’s former buyers. Thus, the world oil market would again reorder with no effect on price.

If the Chinese takeover of Unocal is blocked with a bogus “national security” justification, the world will merely see an attempt by the U.S. government to unfairly help Chevron, a U.S. company that was outbid by CNOOC in the Unocal takeover attempt. Such government meddling in a U.S. market traditionally seen as free by world standards could result in a chilling of foreign investment, which is important for U.S. economic prosperity. As indicated by CNOOC’s share price on the Hong Kong stock exchange, the market is already predicting that the U.S. government will stop the company’s acquisition of Unocal. Let’s hope the market’s prognostication is wrong.

*************

Ivan Eland is a Senior Fellow at The Independent Institute, Director of the Institute’s Center on Peace & Liberty, and author of the books The Empire Has No Clothes, and Putting “Defense” Back into U.S. Defense Policy.

© Scoop Media

 
 
 
 
 
Top Scoops Headlines

 

Werewolf: Living With Rio’s Olympic Ruins

Mariana Cavalcanti Critics of the Olympic project can point a discernible pattern in the delivery of Olympics-related urban interventions: the belated but rushed inaugurations of faulty and/or unfinished infrastructures... More>>

Live Blog On Now: Open Source//Open Society Conference

The second annual Open Source Open Society Conference is a 2 day event taking place on 22-23 August 2016 at Michael Fowler Centre in Wellington… Scoop is hosting a live blog summarising the key points of this exciting conference. More>>

ALSO:

Buildup:

Gordon Campbell: On The Politicising Of The War On Drugs In Sport

It hasn’t been much fun at all to see how “war on drugs in sport” has become a proxy version of the Cold War, fixated on Russia. This weekend’s banning of the Russian long jumper Darya Klishina took that fixation to fresh extremes. More>>

ALSO:

Binoy Kampmark: Kevin Rudd’s Failed UN Secretary General Bid

Few sights are sadder in international diplomacy than seeing an aging figure desperate for honours. In a desperate effort to net them, he scurries around, cultivating, prodding, wishing to be noted. Finally, such an honour is netted, in all likelihood just to shut that overly keen individual up. More>>

Open Source / Open Society: The Scoop Foundation - An Open Model For NZ Media

Access to accurate, relevant and timely information is a crucial aspect of an open and transparent society. However, in our digital society information is in a state of flux with every aspect of its creation, delivery and consumption undergoing profound redefinition... More>>

Keeping Out The Vote: Gordon Campbell On The US Elections

I’ll focus here on just two ways that dis-enfranchisement is currently occurring in the US: (a) by the rigging of the boundary lines for voter districts and (b) by demanding elaborate photo IDs before people are allowed to cast their vote. More>>

Ramzy Baroud: Being Black Palestinian - Solidarity As A Welcome Pathology

It should come as no surprise that the loudest international solidarity that accompanied the continued spate of the killing of Black Americans comes from Palestine; that books have already been written and published by Palestinians about the plight of their Black brethren. In fact, that solidarity is mutual. More>>

ALSO:


Get More From Scoop

 
 
 
 
 
 
 
Top Scoops
Search Scoop  
 
 
Powered by Vodafone
NZ independent news