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FRIDAY, JULY 8, 2005
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EDITORIAL

Congress wise to study China's bid for Unocal

Congress was wise to pass a resolution demanding careful scrutiny of a Chinese corporation's bid to purchase a California-based gas and oil company.

The move came after a state-owned company in China bid for a takeover of Unocal Corp.

China is a communist dictatorship. Consequently, the takeover bid is functionally a bid by China itself. In a vote last week, the House of Representatives demanded that U.S. officials study the bid carefully for U.S. security implications.

With a population almost five times larger than America, China has a voracious appetite for petroleum products. The proposed deal should therefore cause fewer concerns than would a similar effort by a country that exports gas and oil to the United States. Unlike Saudi Arabia or Venezuela, China would not be able to use its Unocal ownership to punish a dependent United States.

But even as a petroleum importer, China's ownership of Unocal and its oil reserves could cause conflict between the two most powerful nations in the world.

As reserves dwindle, nations will increasingly struggle to satisfy their petroleum needs. While production is adequate now for international demand, the time when petroleum supply fails to meet demand is on the horizon.

When that time comes, the United States would have the ability to divert petroleum reserves controlled by U.S. companies to satisfy U.S. needs. That ability would disappear in the event of a takeover by China.

The United States and China already have a rocky relationship. Rejecting China's Unocal bid would cause tensions, but approving the bid would leave the two nations in a posture that could cause much more serious conflict when the desire for petroleum becomes more desperate.

Future conflict over oil reserves is inevitable. We should plan now for the coming shortage by securing available reserves and by taking steps that will reduce the possibility of military conflict when shortages begin.

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