China Kissing OPEC Goodbye

05/25/2011 11:50 am ET
  • Raymond J. Learsy Author, 'Ruminations on the Distortion of Oil Prices and Crony Capitalism'

It is the accepted wisdom that America's energy destiny is anchored to the future energy needs of China. That our energy addiction will be tempered or exacerbated by China's increasing appetite for fossil fuels in the years to come. We may be "addicted to oil" but so too is China and the question appears to become who will best accommodate the pusher on the block, namely OPEC.

President Bush, in his State of The Union speech has made a number of proposals that will have little or no impact on current usage of fossil fuels. The issue of demand was left untouched, demand as in controlling consumption much in the way OPEC controls supply. Alternative energy sources were mentioned but with only a modicum of conviction, and the task of weaning ourselves from the Middle East was given a near generational timeframe to 2025.

China too has its problems. We know about its growing economy and its burgeoning need for energy. President Hu Jintao, in a recent speech at a Communist day reception called for an "energy-efficient environmentally friendly society" warning that China had to rein in its surging energy use. Most significantly it is determined to limit its soaring reliance on outside energy supplies.

Respectful of the presence and power of the pusher on the block President Hu Jintao recently invited and lavishly entertained Saudi Arabia's King Abdullah. All the usual emollients were brought out of the cupboard-including references to growing trade relations, to future cooperation and joint ventures, even talk of updated missile deliveries (in sotto voce of course). And while President Hu was feasting King Abdullah, China's oil interests were investing and striking production agreements with Nigeria, Kazakhstan, Iran, Syria, Sudan, Venezuela and even Australia. They were making a concerted effort to broaden the sourcing of their crude oil supply. Their failed efforts to take over Unocal for U.S. "security" reasons still fresh in memory.

We in turn were being admonished by President Bush to break our addiction to Middle Eastern Oil. Among the modest proposals presented in his State of the Union Speech was a fleeting reference to nuclear energy. It was an energy pep talk with very little energy or teeth.

China in the meanwhile is proceeding on its own path. President Hu and his entourage are aware of the fawning status that has befallen this nations relationship with the pusher on our block, namely OPEC's leading player, Saudi Arabia.

Keen on shaking their addiction and not wishing to follow the American example, China has instituted measures opting for alternative sources of energy be it hydroelectric, wind and solar, alternative fuels, etc. Conservation in a very practical and effective way is being instituted as well such as taxing gas guzzling clunkers. And with results! China's economy expanded near double digits last year, yet imports of crude oil were reported to have fallen back by 5 %! While domestic production of crude oil increased some 3.5% to approximately 1.25 billion barrels.

Most striking however is China's decision to tie their increasing energy needs to the development and expansion of nuclear energy. China's goal is to grow its production of nuclear generated electric energy five fold in the next fifteen years. This will call for the building of up to 40 new nuclear power plants during that timespan.

This in stark contrast to our nuclear energy policy which has not seen a new nuclear power plant built since the 1970's. It is long overdue that we reexamine the nuclear option. Certainly there are real problems with the disposal of nuclear waste. Yet France has satisfactorily dealt with that issue and today produces nearly 80% of its electric energy from nuclear power.

Given China's commitment, France's performance it is time we thoroughly reexamined the pros and cons of nuclear energy. After all what do France and China know that we do not? Aside from helping to wean us off imported oil, nuclear energy has decided environmental benefits. It causes no lung damage from breathing in harmful emissions, no vegetation destruction from acid rain and no global warming. The oil patch will fight it, but its contribution to our energy self reliance, our national security and to our environment would be enormous. As China is pointing the way, the technology is there to be implemented in short order.

In the meantime while we continue to procrastinate, don't look over your shoulder. Behind you are Chinese Hybrid cars by the millions coming this way. And if you do look, in a not too distant future, you'll see that the person picking up the tab in that Beijing restaurant is none other than King Abdullah himself.