A few more thought as a follow up to our last China/Latin America/Oil post:
Do not underestimate how significant this development is. It now appears that the MSMedia, the DOE, and the US Senate are (finally) recognizing what’s happening:
"China’s entry is worrisome to some American
energy officials, especially because the United States is becoming more
dependent on foreign oil at a time when foreign reserves remain tight.
It was the limited supplies that pushed a barrel of oil to $55 in
October, driving up retail prices and hurting economies. On Monday,
crude oil for April delivery settled at $51.75 in New York, up 26 cents.
The Senate Foreign Relations Committee, headed by Richard G.
Lugar, Republican of Indiana, recently asked the Government
Accountability Office to examine contingency plans should Venezuelan
oil stop flowing. Chinese interest in Venezuela, a senior committee aide said, underlines Washington’s lack of attention toward Latin America. (emphasis added)
"For years and years, the hemisphere has been a low priority for the
U.S., and the Chinese are taking advantage of it," the aide said,
speaking on condition of anonymity. "They’re taking advantage of the
fact that we don’t care as much as we should about Latin America."
What makes this passion play so fascinating is that US imported oil
comes via the free market and
major public integrated oil companies,
who are profit driven. China has no such limitation on what they can
spend on oil — other than their own bank accounts:
seeking out potential deals, China tries to out-muscle the big
international oil companies, always beholden to shareholders. Chinese
companies, which have substantial government help, can dispense
government aid to secure deals, take advantage of lower costs in China
and draw on hefty credit lines from the government and Chinese
"These companies tend to make uneconomic bids, use Chinese state
bilateral loans and financing, and spend wildly," Frank A. Verrastro,
director and a senior fellow at the Center for Strategic and
International Studies in Washington, told the Senate Energy Committee
early in February. "Chinese investors pursue market and strategic
objectives, rather than commercial ones."
Fascinating stuff . . .
Read it her first: China’s Latin American Oil Grab
China’s Oil Diplomacy in Latin America
NYT, March 1, 2005