30-05-05

When gasoline prices headed skyward this spring, Bob Preston began urging customers at the Advance Auto Parts store he manages to replace dirty air filters. Hoping for good gas mileage from an engine that can't breathe properly, Preston told them, is like trying to run "when your lungs are bad."

Pick up a filter, though, and there's a good chance it came from China, whose export-driven economic boom has turned it almost overnight into the world's second largest oil importer and a fierce competitor for the lifeblood of modern civilization.

As Americans start the summer driving season, that competition is part of the reason they are paying an average $ 2.13 a gallon for regular gasoline, with little relief in sight.

"There is a bidding war going on," said Gal Luft, executive director of the Institute for the Analysis of Global Security, a Washington research group. China's sudden thirst for oil has also shifted the strategic landscape, as the world's most populous country scours the globe to keep its burgeoning middle class humming along in new cars and its military fuelled for modernization.

"The Chinese do believe now that they are living through an energy crisis and that they have to secure supplies in order to maintain economic growth, create jobs and preserve social stability," said Daniel Yergin, author of "The Prize," a survey of the international pursuit of oil.

With its domestic production unable to keep up with soaring demand, China for the first time in its 5,000-year history is dependent upon foreigners for a commodity it can't do without.
"They regard energy," said Yergin, "as a critical security issue."

America's leaders have long held the same view. With 5 % of the world's population, the United States guzzles 25 % of the world's oil, and 6 of every 10 gallons come from abroad. Locking up stable oil supplies has been a guiding force in US foreign policy since the internal combustion engine revolutionized military operations in World War I. Analysts say China's aggressive entry into the global oil bazaar marks a turning point in how the United States is tackling one of its overarching security objectives.

"It's a huge event," said Ilan Berman, vice president for policy with the American Foreign Policy Council in Washington. Adds Booz Allen Hamilton associate Evan Ellis, "The global energy equation is permanently changed."

In the Middle East, Africa and even the Western Hemisphere, Chinese and US oil companies are butting heads over global oil supplies that many geologists predict will peak within the next 20 years. With scarcity, analysts worry, could come conflict.

Already China's global quest for oil has rocked US foreign policy in several key areas:
-- China's pressure for new oil sources in the Caspian Sea and the Russian Far East has complicated multibillion-dollar pipeline arrangements affecting the United States and several of its key allies, including Turkey, South Korea and Japan. In some cases, the United States is providing military aid to nations already skirmishing with their neighbours over disputed drilling areas.

-- China's oil deals with Iran and Sudan have made it hard, perhaps impossible, for the United Nations to sanction those two countries over Tehran's nuclear weapons ambitions or the ongoing genocide in Darfur. That, analysts say, is just the beginning of how US diplomatic efforts will be complicated in the future by oil for China, a veto-holding member of the UN Security Council.

-- With China knocking on their doors, countries like Venezuela and Nigeria have begun to play an oil card aimed at countering US leverage on issues like good governance and human rights.

Source: Dow Jones