Wednesday , May 22 2024
Oil...what emerging economic powers like China and India need most to ensure they keep up with the developed world

Oil, China, and India

Oil. It makes the world’s economy go round. It’s the rumoured cause of the wars in Iraq. It’s also what emerging economic powers like China and India need most to ensure they keep up with the developed world.

Which all explains both countries’ recent interest in acquiring control of Canadian-owned PetroKazakhstan(PetroKaz). China National Petroleum Corp, China’s largest oil and gas company, recently outbid India’s state-owned oil company, Oil and Natural Gas Corp. Ltd.” in a bidding war for rights to control the oil fields of Kazakhstan.

The location of these lucrative fields would be a natural fit for either country, given each’s proximity to the country of origin. Having a ready supply of local oil will improve their trade balance, and cut costs even further for two already low-overhead economies. China’s coming out on top of this deal can only increase the impact their economy is having on global markets.

Although China and India have just announced an agreement, which will see their countries combining efforts to bid on energy assets, they are still pursuing their own targets as well. They are not limiting themselves to just oil fields either. Anything connected to the petrochemical field is considered essential; plastics are of special importance.

At present, everyone’s favourite marketplace for doing natural resource deals seems to be those old hewers of wood and carriers of water people, Canada. According to the “Globe and Mail” there are a number of factors contributing to Canada’s appeal as a place to buy your very own petroleum company.

First is the fact that there is plenty available to pick and choose from, second we are not a war zone, or even near by to one, and finally our dollar is still low enough to make purchases relatively cheap. It’s not only oil that’s being bought up, nor is it only China and India doing the buying. Both French and Swiss companies have bought up interests in mining operations in recent purchases and are looking to buy more. Even that old stalwart of Canadian industry, Inco, could be on the market.

The real money is still over in the oil business. The Chinese are paying way above share value for the companies that they are buying, thus making them hard offers to refuse. Some market analysts are putting this down to inexperience in the world market place, or the fact that they are subsidised by the state so don’t have to worry about profit and loss margins and stock holders.

On the other hand, I wonder if it’s not deliberate policy. Knowing how dependent they are on oil for the continuation of their economic growth, does it not make good sense to secure self-sufficiency? Even if the initial out lay seems a little steep, it’s better than finding yourself at the mercy of others a little further down the road.

Look at the situation that both America and Canada are in right now. Fuel prices at the pump are going through the roof for the average motorist. Small, insignificant military powers like Venezuela can threaten the U.S. by threatening to turn off the taps and cut off access to a cheap supply of oil.

You would think that Canada would be in a better situation, having Alberta’s resources to draw upon, but the division of powers and rights in Canada gives provinces control over their own natural assets. They are under no obligation to supply any more than negotiated, to the rest of Canada. It all comes down to where they feel they can get the best price. (The quagmire that is inter-provincial relationships is a subject best left for another time and place. Sufficient to say that oil and gas have always been a bone of contention between Alberta and the federal government in Ottawa)

The biggest puzzle for me is why the United States has never made similar moves to those that China and India are making. They could have locked up oil assets years ago by purchasing controlling interest in companies north of the border. Instead of frittering away lives and money in trying to control unstable markets in the Middle East, they could have laid out cash and bought in to a stable oil market close to home.

Is there some sort of provision in The North American Free Trade Agreement (NAFTA) that prevents our countries from purchasing each other’s natural resource assets? Even if that were the case there is nothing preventing them from signing agreements to be supplied by any number of companies with oil. The west coast of America already receives the majority of its electrical power from British Columbia Hydro Electric.

Now of course it would be too late. Both China and India seem to be willing to make these acquisitions in a no-matter-what-the-cost manner. This leaves little or no room for other corporations to manoeuvre.

Together China and India make up close to a third of the world’s population. Only in India has the use of personal motor vehicles caught on, and even than, it is nowhere near as widespread as it is in Europe and miles apart from North America. The majority of their oil usage is directly related to their industry.

If both India and China can develop their own consistent supplies of oil, and keep the demand limited to what is required for industry, their ascension as world economic powers is assured. Our obsession with the war on terror has left us blind to the fact that our economy is in deadly peril of falling into a pit that it may never climb out of.

If things stay on the course they’re running now, it’s soon going to be us wandering around the world with hat in hand looking for help. I hope they offer better interest rates than we did.


About Richard Marcus

Richard Marcus is the author of three books commissioned by Ulysses Press, "What Will Happen In Eragon IV?" (2009) and "The Unofficial Heroes Of Olympus Companion" and "Introduction to Greek Mythology For Kids". Aside from Blogcritics he contributes to and his work has appeared in the German edition of Rolling Stone Magazine and has been translated into numerous languages in multiple publications.

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