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Guest Post: China’s Worst Nightmare - The US’s Oil Weapon
Submitted by Tingbin Zhang, founder of the independent Chinese economic think tank "Zhonghua Yuan Institute"
China’s Worst Nightmare - The US’s Oil Weapon
China’s islanding building on the four-mile-long and two-mile-wide Subi Reef in the South China Sea has put The US in a tight spot. To protect its ally from China’s aggression, The US will be left with little choice but to constrain China by military means. However, the US won't directly engage China in the war in the foreseeable future, because the US dominates China with its superior naval and air force and the only way for China to level the playing field is to apply nuclear weapons. The nuclear nature of Sino-American warfare will make both the world no.1 and no.2 economy the fallen giants.
So there is a possibility that The US might use its oil weapon instead to strike at the core of China’s weakness - it’s huge dependence on oil import. At the moment, China imports 55% of its oil, almost half of which sails from countries in the Persian Gulf?which accounts to 5.3 Million Barrels per Day and is around 75% of Saudi Arabia’s production. As a matter of fact, China’s reliance on Middle Eastern oil has gradually grown in line with its rapid-increasing demand for oil. Right now, China has achieved the equivalent of the peak of U.S. Oil import dependence and is not slowing down a bit. The single largest source of China's crude oil imports is Saudi Arabia.
China’s state oil reserves of 475,900,000 barrels (75,660,000 m3) plus the enterprise oil reserves of 209,440,000 barrels (33,298,000 m3) will only provide around 90 days of consumption or a total of 684,340,000 barrels (108,801,000 m3).
Meanwhile, This US is inching towards the energy independence. With the technological breakthroughs of shale gas and tight oil, the US has started an energy revolution: U.S. crude oil production has increased by 50% since 2008. With that increase, as well as more efficient cars, oil imports have come down from their high of 60% in 2005 to 35% today—as low as in 1973. With domestic production and gasoline mileage still increasing, imports will continue to decrease. It’s also impressive that U.S. natural gas production has increased by nearly 33% since 2005, and shale gas has gone from 2% of output in 2000 to 44% today.
As of 2013, the United States is the world's second largest producer of crude oil, after Saudi Arabia, and second largest exporter of refined products, after Russia.According to BP Plc’s Statistical Review of World Energy, the U.S. has surpassed Russia as the biggest oil and natural-gas producer in 2014. While looking at total energy, the U.S. was over 70% self-sufficient in 2008. In May 2011, the US became a net exporter of refined petroleum products.
With the newly acquired oil might, the US can trick Iran to block the Strait of Hormuz without any economic damage onto the US itself, in order to strike a severe blow to China’s fragile economy. First, The US congress will reject the Iran nuclear deal; and second, The US will give the nod to Isreal’s air strike against Tehran’s nuclear facilities. And then, Iran will retaliate by blocking the Strait of Hormuz. The Strait is the only sea passage from the Persian Gulf to the open ocean. Once it’s blocked, China will scramble to meet its oil demands. In China, the inflation will jump up; the China yuan will plummet, and an economic meltdown will come to bear.
China will succumb to the US’s might of oil weapon to save itself from political, economic and social collapse. The oil weapon will achieve what the military can’t achieve at less cost. This scenario is something China should be really worried about.
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silly
whatever damage the US inflicts on China's energy sources, China will be able to retaliate by least 60%.
And if the US's war against China is joined by Russia, there would be parity of damages. There would not be a functioning oil refinery on each of the US's three coasts.
There's always the possibility that the initial attack on China's energy's sources will be so overwhelming that China will respond with nuclear weapons.It's called deterrence, it's why it doesn't happen in 70 years.
70 years ago the deterrence was called the Maginot Line and it didn't work. 45 years ago it was called the Anti Ballistic Missile Treaty and it worked so well for 25 years that Baby Bush withdrew the US from it in 2002.
Now the world only has the the Neocon's maxim
Mr Putin has certainly picked up on that
So we'll have to wait and see whose iron gets hot first.
You're trollish roots are showing through BTS:
https://en.wikipedia.org/wiki/Chagai-I
https://en.wikipedia.org/wiki/List_of_North_Korean_nuclear_tests
What did you expect them to do, nothing? Get real.
Respectfully disagree. The collapse in oil prices shows the potential effect of ST inelasticity in physical markets. US had filled its storage buffer (everything nearing 80%) and built out a strategic capacity buffer to keep a lid on domestic prices (that's what Shale was always about... There's no real excess capacity in the system right now (comparisons to 80's oil crash could not be more intellectually dishonest as the House of Saud had millions of BPD excess capacity temporarily shuttered, where they are pumping full out now). Shake never was viable as "baseload" but rather "peak") and it will be used during the transition to a USD and gold world (the painful part of the de-financialization process that is mathematically certain and inevitable given the orders of magnitude disconnect in unpayable accumulated and derived phantom debt claims and REAL wealth...
We de-financialize through a strong USD and the US remains dominant now and into the future. Yes, EUR and JAP are screwed (but they are anyway given demographics and natural resources), but the our government and our military's obligation is the US citizens, not One World Government. It is the dominant strategy for the US to maintain economic and geopolitical leadership.
China is only threatening land grabs to destabablize government policy in the region
This guy probably writes for The Epoch Times, the virulently anti-China mouthpece of the Falun Gong cult in Boston.
REALLY Tyler.... What the fuck were you thinking posting this article..
"Meanwhile, This US is inching towards the energy independence. With the technological breakthroughs of shale gas and tight oil, the US has started an energy revolution:"....
ROTFLMAO
Congress will pass the legislation by changing the wording in order to make them all appear to look good.At least in their own eyes.China can take as much oil as thet need from Russia.There's lots of over capacity.One thing is guaranteed,Iran will dump huge amounts of oil onto the market very shortly and very dramatically.
More "We're awesome, no worries" propaganda! ROFL.
Never underestimate your opponent.
Always assume your opponent is smarter than you.
China buys natural gas from Russia
This report is sort of stupid. It neglects inter alia that the US production of oil and shall gas is not economically and financially sustainable and that Russia and China are in the process of joining forces also in the area of supplying oil and gas from Russia to China which activties, as even geographically illiterate US-citizens should know, could not be blocked by any naval activities.
"independent Chinese economic think tank"
From the incredible stupidity of that analysis that anyone with half a geopolitical clue can shoot oil tanker sized holes through, I think "stupid tank" would be a better term.
What about Russia...the opinion writer seem to have forgotten that China can get oil from Russia, one of the largest producer of oil in the world. The only reason China is claiming the Spratley is because of oil. Once they have Spratley they have their own source of oil within their territory and US will not be able to do anything to China.
This scenario is possible, demonstrating strengths & weaknesses of all. The biggest obstace to USA accomolishing most of this is the political will of the new president!
I'm amazed how these writers can maintain one side of the equation static while allowing the other side to flop all over the place.
The static part:
The dynamic part:
The conclusion:
Did it ever occur to the writer:
Things change. You don't have to declare war every time you get a little behind or a little ahead.
The author seems to have forgotten that the oil market is global. Any drop in supply caused by closure of the straight will cause prices to rise everywhere, including in the US. It could be that the economic damage to China from a given increase in the price of oil would be greater than the economic damage to the US, so that the US gains a relative advantage, but both will most certainly be damaged.
The author's also ignoring a major secondary effect: if Chinese producers' input costs soar, so too do consumer goods prices on the shelves of Walmart. And on and on. Again, it could come out that China is harmed relatively more, but that's far from clear.
The best way for the US to hurt China re oil is not to cut supply in the ME, by tricking Iran in closing the straight, but rather to blockade China: cut off the shipping lanes through the Indian Ocean. This would cause oil prices in China to surge while prices for everyone else actually fall. And this is indeed the US strategy in the event of war, of which China's perfectyl aware, hence their effort to build overland pipelines that the US Navy can't reach.