Photo:8266142:right>Two very different bets are being placed by officials in the United States and China on their nations’ respective energy futures, and the winner will be the No. 1 economic power in the world.
The U.S. under the Obama administration is betting the mortgage on soft energy sources they call “green energy,” while promoting conservation and making it harder to produce traditional sources.
China, on the other hand, is pursuing a widely diversified energy future that includes alternatives, but also relies heavily upon the sources that currently provide the bulk of U.S. energy. For China, energy is the key to growth, while the U.S. is practicing the limits of growth. The stakes could not be higher and Americans should be watching closely.
Energy is defined as “the capacity to do work.” If energy becomes more expensive or harder to get, less work will occur, especially for those industries, functions or regions of the country that use large amounts of energy.
The U.S. appears to want to stop using oil, foreign or domestic, while the Chinese are scouring their lands and waters and those of the rest of the world to secure all the supplies they will need for the future.
PetroChina recently acquired majority interest in an Alberta, Canada, oil sands property for $1.7 billion that may produce as much as 500,000 barrels per day when fully developed. Alberta is the largest source of oil imported into the U.S., but has been under legislative and rhetorical attack by green groups in the U.S. with close ties to the Obama administration and Congress.
Alberta is a huge energy success story for North America, and holds the second-largest oil reserves in the world, but China has been romancing Alberta, while the U.S. has been neglecting its partner.
In Brazil, while the U.S. Export Import bank was lending $2 billion to Petrobras (the Brazilian national oil company) to fund the development of its offshore oil fields, China was lending $10 billion from the foreign currency reserves it have built up as the manufacturer for the world.
The U.S. will take its money back in cash … and buy Brazilian oil if we can afford it. The Chinese will be paid back in oil over 10 years, at 200,000 barrels per day. Brazil has become energy-independent by developing its offshore oil resources, even as the U.S. restricts such leasing and seeks more taxes, regulations and fees for investing in our country.
In Ecuador, China has lended $1 billion to the government in return for a guarantee of 100,000 barrels of oil per day at a steep discount. In Venezuela, a $12 billion joint investment fund between China and Venezuela plans to export 1 million barrels per day of oil and the construction of a refinery in China to process that crude.
Closer to home, China is continuing the aggressive pursuit of their own supplies both on- and offshore, and has signed a $25 billion deal with Russian oil companies to supply them with oil for two decades. It have forged oil deals in Kazakhstan, and in Africa, it have invested in Angola. And China is just getting started.
China sees oil as the essential ingredient for economic growth. It has seen impressive growth at home, and it corresponds with China’s energy use. Between 1998 and 2008, China’s oil consumption jumped 91 percent; its coal consumption 96 percent; its natural gas consumption 240 percent; and its overall energy use doubled.
By comparison, U.S. total energy consumption climbed 4 percent. By 2006, China surpassed the U.S. in carbon dioxide emissions, and China shows no willingness to trade the economic growth energy use has made possible for an emission reduction strategy, as the U.S. is doing.
The questions for the American public and policymakers is which of these approaches will produce a stronger nation in the end, and whether we risk our economic standing in the world through government-induced energy scarcity. The stakes for our nation are extremely high, so let us hope our leaders aren’t betting on the nag in this race.
Daniel V. Kish is vice president for policy of the Institute for Energy Research.
