The Thinker: Rich Galen


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Protecting Chinese Oil

Rich Galen

Wednesday June 5, 2013


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From Des Moines, Iowa

NOTE: As I have mentioned before, I do work for T. Boone Pickens and The Pickens Plan. Please read what follows through that potential filter

  • According to the Washington Post, 6,648 U.S. service personnel were killed in Iraq starting in April, 2003.

  • The vast majority of those killed, 4,588 or 69 percent were young people under the age of thirty.

  • I am not going to re-litigate the Iraq war today. Or, probably, ever. But I do want to point out an issue that has arisen over what has happened to all the oil in Iraq over which, according to many, we had gone to war to protect for our own use.

  • It didn't work.

  • According to an article by reporters Tim Arango and Clifford Krauss in the New York Times over the weekend, "Since the American-led invasion of 2003, Iraq has become one of the world's top oil producers, and China is now its biggest customer."

  • According to the article, China buys about half of all the oil being produced in Iraq and "is angling for an even bigger share."

  • The United States doesn't have any particular claim to the Iraqi oil - to say we do would be to give credence to the "We're-In-It-For-The-Oil" crowd. But it is useful to remember that the Chinese (and a bunch of other nations) did nothing to topple Saddam but are eagerly importing Middle Eastern oil.

  • The Chinese are willing to give the Iraqis a bigger slice of the oil pie, according to the piece, because they are not in business to satisfy shareholders by making a profit.

  • The Chinese oil companies
    "are tools of Beijing's foreign policy of securing a supply of energy for its increasingly prosperous and energy hungry population."

  • When people talk of a "free market in oil" this is a good point to remember: The Chinese economy is a strange amalgam of public, private, for-profit, not-for-profit, government-controlled, super-rich-oligarch-controlled, whatever-suits-the-moment system.

  • During Saddam's reign of terror international sanctions made it difficult for Iraq to sell its oil overseas. We often talked about the fact that the Iraqis were sitting on some of the largest oil reserves on the planet and would soon be back in the business of producing it, selling it, and rebuilding its society which stretches back to Mesopotamia.

  • So far, that hasn't worked, either.

  • Not only are the Chinese cashing in on the oil we helped bring back on-line to the global economy, but we are single-handedly protecting it.

  • The U.S. Fifth Fleet (based in Bahrain) specifically protects oil tankers moving through the Strait of Hormuz.

  • The Strait of Hormuz is a narrow opening at the base of the Persian Gulf only about 24 miles wide. That's less than the distance between the White House and Dulles International Airport.

  • The shipping lane is only about two miles wide.

  • It is bordered on one side by Oman and on the other by Iran.

  • According to the U.S. Energy Information Administration, some 17 million barrels of oil pass through the Strait of Hormuz every day.

  • According to National Geographic, 77 percent of that oil goes to Asia, eight percent to Europe, three percent to Africa and other Middle Eastern destinations and only about 12 percent comes to the U.S.

  • Yet we pay 100 percent of the cost of protecting that oil.

  • China is making a very, very good deal.

  • I am not suggesting we pull up stakes (or anchors) and leave ships passing through the Strait to their own devices - or the Iranian navy, but Professor Roger Stern, of University of Tulsa National Energy Policy Institute has estimated that from 1975 to 2010 the U.S. had spent $8 trillion protecting that oil.

  • That's a little over a quarter of a trillion dollars a year to make sure the Chinese and the Europeans' oil travels safely to their home ports.

  • We need the two million barrels of oil we get from Persian Gulf shipments because even with domestic oil production on the rise, we still use more oil (mostly for transportation) than we produce.

  • Shutting down the Fifth Fleet headquarters in the Gulf is not an option. But, getting the countries that are the beneficiaries of our Navy's protection should be.

  • A virtual toll booth for ships passing through the Straits of Hormuz to help defray the costs of protecting them should be part of a plan to reduce the U.S. national debt.

  • On the Secret Decoder Ring today: Links to the NY Times article, to the Wikipedia page (including good maps) of the Strait of Hormuz and to the Fifth Fleet.

    Also a nostalgic Mullfoto from a grain farm in Iowa.

    -- END --

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