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A Wake Up Call by Allan Topol, 2005
ARTICLE ORIGINALLY APPEARED AT
MILITARY.COM, July 6, 2005
Americans should feel enormous anxiety. For months we have watched with dismay as oil prices, first per barrel on the world market and then per gallon at the pump, have risen sharply. This is not market manipulation by Arab oil producers as in the 1970s. Rather it is a question of supply and demand.
The booming Chinese economic machine needs an ever increasing supply of oil and gas. Lacking these scarce national resources, China has surpassed Japan and is second only to the United States as an oil importer. Moreover, the Chinese have been far more aggressive than the United States about making arrangements for long term supply. Beijing has exploited political troubles around the globe in such diverse places as the Sudan and Venezuela to lock in future supply.
As the Chinese economy continues to march forward, we are fast approaching the point where the price of oil will severely depress the American economy. With sixty percent of our oil being imported, if there were a couple of terrorist attacks in Saudi Arabia, for example, all of the oil we need will not be available at any price.
This Chinese move has also prompted anxiety because it is the latest example of Chinas acquisition of U.S. companies. Their economy is no longer being driven by peasants in sweatshops making blouses and sneakers. Last year a Chinese firm took over IBMs personal computer business. Another one is bidding for Maytag, the largest U.S. manufacturer of household machines. Now Unocal.
Beijing views itself as locked in an intense competition with the United States for economic supremacy in the world. Some economists predict that just as we surpassed Britain in the last century, the Chinese will surpass our economic output in another twenty years. In response to this analysis, there is a great deal of wishful thinking that the Chinese economic threat is no more serious than Japans was a decade ago. What these delusionists ignore is the huge disparity in the populations of these two Asian nations.
With economic dominance comes military superiority. Hence the United States has reason to be concerned about our position as the sole military super power in the world.
The U.S. response in the military sphere has been to lean on our allies not to sell sensitive technology to China. This is the equivalent of placing a band aid on a hemorrhaging wound. Last year, Chinese universities graduated four times more engineers than our universities. They will catch up on their own in the military technology area.
This brings us back to the Unocal transaction and CNOOCs bid to prevail over Chevron in this acquisition. Some in Washington are arguing that congress should enact, on national security grounds, legislation barring the Chinese from obtaining Unocal with its valuable oil and gas reserves. Reassurances from Beijing that Unocals reserves would always be available to the United States were less than comforting.
If the Chinese had made an offer for Boeing, Lockheed Martin, Northrop Grumman, or one of the United States major defense contractors, such legislation would make sense. For Unocal, its a very close question. Oil may be more like missiles than washing machines.
We have a narrow window while the Unocal deal plays out between Chevron and CNOOC. President Bush should use this time to appoint a high level group of economists, senior military people, and energy experts to provide a short term recommendation on what response is appropriate for CNOOCs Unocal bid, and long term proposals to deal with our energy situation.
The United States is in this mess because we as a country have failed miserably to reduce our dependence on foreign oil. The handwriting has been on the wall since the 1973 Arab oil embargo. Now our standard of living is suddenly on the line. The Chinese bid for Unocal is a wake up call. We had better pull our head out of the sand and mount a national effort to address this problem.
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