A New Energy Age
12:00 AM, Feb 23, 2013 • By IRWIN M. STELZER
China is doing more than subsidizing renewables and building coal and nuclear plants, although it is doing plenty of each of those. It is locking up overseas supplies of crude oil. Its state-owned enterprises (SOEs) are in a position to include in their bids for oil supplies the value assigned by the regime to security of supply, while private-sector bidders have to base the prices they will pay only on the commercial value of the resources. The SOEs—among them CNOOC and Sinopec—are estimated to have spent almost $100 billion acquiring foreign oil companies in the past few years, and the International Energy Agency estimates that by 2015 China will have doubled the overseas output under its control from levels in 2011, and match such OPEC producers as Kuwait in overall controlled production.
The Chinese are also acquiring foreign energy technology, either by making access to its markets conditional on the handing over of important technology, or by what we might politely call less overt means.
It is obvious from even this partial list of the changes in the energy markets that we are entering a new energy age. With major geopolitical implications.
· An oil- and gas-rich America will care less about ruckuses in the Middle East, although even a self-sufficient America remains subject to developments in international markets. Even more important, Jin Zhongxia, head of the research arm of China’s central bank, says America’s new energy opulence assures that “The dollar’s global dominance will continue.”
· China is using its lock-up of oil supplies to extend its political influence in Africa. Private-sector companies can’t compete with China’s SOEs in countries in which China’s rulers can add a new port, an airport, an air traffic control system to supplement the SOEs’ cash bids. The regime is also becoming more belligerent in offshore areas believed to hold large deposits of oil and gas, causing a shift of some U.S. military assets to the Pacific region.
· Europe and the UK, their economies already under strain, are finding that green comes dear, and that costly energy is interfering with their export-led growth strategies.
· The energy deck is being reshuffled. Fracking is likely to drive down oil prices in the long run. Coal will remain a major player, green wishes notwithstanding. Renewables continue to be dependent on subsidies, which cash-strapped countries are putting under review. Nuclear power is a high-cost option, its role largely dependent on how much governments are willing to extract from customers and taxpayers or, in a few instances, how much utilities are willing to pay to avoid too-great dependence on natural gas.
Real tectonic plates move slowly, about at the rate that your fingernails grow. The energy economy’s plates are moving far faster than that, with profound political adjustments to follow.