The Oil and the Glory
One scenario for the U.S. and China to stop their brawling
Is it rational to fear resource war with China a decade or two down the road, when it surpasses the size of the U.S. economy, its appetites surge for metals, elements and energy, and its blue-water navy has grown in capability to secure large swaths of distant sea? Yes, if you embrace the mainstream conviction ...
Is it rational to fear resource war with China a decade or two down the road, when it surpasses the size of the U.S. economy, its appetites surge for metals, elements and energy, and its blue-water navy has grown in capability to secure large swaths of distant sea?
Yes, if you embrace the mainstream conviction that the pace of Chinese growth and call on finite resources are incompatible with consumption patterns in the U.S. and Europe. Under this scenario, the West and China are on a collision course: Starting in the next decade, one or the other must either begin to adapt to much-shrunken expectations, invent an entirely new set of fundamental fuels and high-tech building materials, or simply put up their dukes and fight it out.
But what if a new strain of thinking is correct, and we are entering a world not of fossil fuel scarcity, but of a surprising abundance of oil? The spreaders of this new narrative are tallying up production projections in a slew of new and long-known oil patches around the world — Canada’s oil sands; U.S. shale oil and deepwater Gulf of Mexico; deepwater Brazil; the Equatorial Margin of eastern South America; deepwater Angola; offshore Kenya; the Russian Arctic; and elsewhere (such as the Canary Island, pictured above).
They are suggesting by implication that, if all that pans out, the West and China will not be on the path of a smashup; rather, they will be having a much different conversation, which would center on a question of choice:
Until now, the push for clean-tech has been partly driven by a belief that oil is running out — we had to develop new sources of energy, and fast, or go back to the forest. Now that there was no impending age of darkness, the U.S., China and others would have to decide on its merits — do they want a cleaner world, one that is not heating up inexorably and sending seawater over the major cities and swallowing up island nations?
The reason they would have to hold such a conversation is that the corollary of this narrative is a wholesale swamping of clean-tech — oil prices would probably drop so low as to eliminate the competitive economics of virtually any alternative energy source.
Of course, this narrative works only if the stars align — if the projections pan out, environmental and other regulatory hurdles are scaled, PR is carried out well, and so on. As context, Cuba last week delivered a dry hole to Repsol, which had hoped for more — much more — in an offshore belt north of Havana that it estimates holds 6 billion barrels of oil. The Cuban result underscores that oil projections are just that — projections.
For those interested, I discussed these questions as part of a panel at the Center for National Policy, alongside Charlie Ebinger, who watches energy for the Brookings Institution, and Carter Page, a frontier investment banker.