Unocal 101

Human Events ^ | July 6, 2005 | Terence P. Jeffrey

[hinterlander]

You don’t need to be Carl von Clausewitz to figure out that it could damage U.S. security interests if the Communists in Beijing defeat Chevron in their competing bids to purchase Unocal, the 9th largest U.S. oil-and-gas company.

Just as Clauswitz, the 19th-century Prussian strategist, argued that war is the continuation of politics by other means, the People’s Republic of China has discovered that acquiring certain assets on the world market is politics by other means.

It does not matter whether the asset the regime seeks is state-of-the-art missile technology or old-fashioned crude, the ultimate question is whether the acquisition increases the PRC’s likelihood of controlling the outcome in a matter of contention with one or more rival nations.

[brownsfan]

The Chinese will get what they want, because they own a fair number of our politicians, (from BOTH parties!) The token screaming from various pols was just a reminder to the Chinese that these folks want paid before the Chinese make such a bold move.
The free traders will back this move 100%.

I'm urging my children to study Chinese.

[Tactical]

If common sense actually comes into play here, the U.S. wouldn't allow a country such as China to own or manage any U.S. Company that could affect the security of the U.S.

The Panama Canal comes to mind, missile technology and border security. Now add fuels.

But since none of these important areas have been handled with any common sense, I don't expect anything from the U.S. Govt except someone getting their pockets lined with cash.

[Alberta's Child]

There's one interesting aspect to this story that has been overlooked.

The PRC buys Unocal, the majority of whose energy reserves are in Asia, closer to China than to the U.S.

If most of Unocal's energy reserves are in Asia, then a strong case can be made that it isn't even really a "U.S. company" anyway. The United States government (despite a very common mistaken belief to the contrary) has no obligation -- nor does it have the legitimate authority -- to protect/defend a company's resources in other countries. If some of Unocal's Asian energy reserves were simply seized by the local government instead of purchased by Red China, this country really has no business complaining about it.

[kellynla]

Americans have been fattening the Chicom coffer for decades by buying their junk at Walmart, Target et al and now they're going to buy us out...

"capitalists will buy the rope..." well I'm sure you know the rest

I hope you all will be happy living under the Communist boot.

Semper Fi,
Kelly

[sefarkas]

If some of Unocal's Asian energy reserves were simply seized by the local government instead of purchased by Red China, this country really has no business complaining about it.

Can you spell 'ARAMCO'?

[zook]

There's an interesting op ed piece in the WSJ today by the guy who runs the Chinese company seeking to buy Unocal. He points out that it would be completely irrational to use this sale to funnel oil and gas away from the US, since, the US is the largest market in the world.

Think about it--what sense would it make for me to buy a MacDonalds franchise just so I can get free hamburgers?

[Toddsterpatriot]

He points out that it would be completely irrational to use this sale to funnel oil and gas away from the US, since, the US is the largest market in the world.

I'd like to know how much of Unocal's current production even gets sold in America? If most of their reserves are in Asia, it probably makes sense for them to sell that oil in Asia. Less delivery expense.

If the sale to China takes place, the oil doesn't disappear. China would then buy less on the open market which would make more available for us to buy. It wouldn't impact world oil prices.

[Alberta's Child]

Yes, but there's one element of that Chinese guy's assertions that's been overlooked. In a state-owned industry that is the dominant form of company ownership in China, a profitable market doesn't mean anything when you are manipulating your currency so that you have a competitive advantage in other areas. China's currency manipulation gives them a tremendous competitive advantage against the U.S. in manufacturing, but it puts them at a severe disadvantage when buying commodities from other nations.

China maintains a huge trade surplus with the U.S., but it can't eat dollars. China doesn't "need" to sell oil and gas to the largest market in the world -- it "needs" to get its hand on sources of oil and gas that it can keep for its own use regardless of how lucrative the global market for oil is.

Think about it--what sense would it make for me to buy a MacDonalds franchise just so I can get free hamburgers?

That's the wrong question to ask, since oil is a commodity and a MacDonalds hamburger is a "final product." A better example would be this: If you are MacDonalds and you need a source of beef for your own hamburgers, wouldn't it make a lot of sense for you to buy your own ranches so you could raise cattle for your hamburgers -- even if you could make more money in the short term by selling your beef to someone else for steaks?

[Wiz]

Comparing purchase of Hamburger firm and oil firm is like comparing an orange with an apple.

[zook]

I follow.

[superiorslots]

Quote: China would then buy less on the open market which would make more available for us to buy. It wouldn't impact world oil prices.


However it would make us even more dependent upon the idiots in the middle east and we would be putting all our eggs in one basket so to speak. Who knows what the situation will be in the ME next year or 5 years.

Your reasoning is also if the demand for oil stays status quo. There will be continuing demand each year from all countries so in effect it will make the oil we have to buy even more expensive because we will be selling off one of your sources.

Quote: China would then buy less on the open market which would make more available for us to buy

HUH???? What you are saying can go the other way. Why don't we keep the oil in the first place so we don't have to buy as much on the open market? Let the chinese pay the higher price and deal with the idiots in the ME.

BTW: Read on another site that china is only interested in the oil not so much the technical expertise of Unocal. They already have contracts with all the big oil producers to help them locate/extract oil in places like Sudan and even their own country. Also the big oil companies are on the side for the sale to go through but for only one reason. If the US blocks the sale then other countries may in the future block US oil companies from buying out oil companies in other countries using the same reasoning. They don't want to be looked upon as hypocritical. They are not overly enjoyed that the chinese might buy Unocal but are looking at the ramifications if the sale is blocked (see previous line). They look upon it as the lesser of two evils.

[Toddsterpatriot]

However it would make us even more dependent upon the idiots in the middle east and we would be putting all our eggs in one basket so to speak. Who knows what the situation will be in the ME next year or 5 years.

Or the idiots in Central and South America.

Your reasoning is also if the demand for oil stays status quo.

No it's not. My reasoning is a snapshot of current demand and current supply.

There will be continuing demand each year from all countries so in effect it will make the oil we have to buy even more expensive because we will be selling off one of your sources.

You still don't get it. Most of Unocal's reserves are in other, mostly Asian, countries. We'd still be buying it from other countries if China did not buy Unocal. If demand continues to increase, the price of this Unocal oil would increase as well.

HUH???? What you are saying can go the other way. Why don't we keep the oil in the first place so we don't have to buy as much on the open market?

You keep using the word "we". "We" can't keep Unocal's oil because "we" aren't Unocal. "We" don't own Unocal, the shareholders do. And when Unocal sells oil, they sell it on the open market. I still haven't seen any info on how much Unocal currently sells to the US and how much it sells to other countries including (GASP) possibly China.

Let the chinese pay the higher price and deal with the idiots in the ME.

You still don't understand markets. If oil goes up in price, everyone will pay more whether they buy from an American owned Unocal, a Chinese owned Unocal, the ME or any other oil company or exporting nation.

BTW: Read on another site that china is only interested in the oil not so much the technical expertise of Unocal.

Interesting. So that line about China using the drilling technology for military purposes was only a scare tactic?