ALL THE OIL IN CHINA?(The Talk of the Town)

When the China National Offshore Oil Corporation, or cnooc, made an $18.5-billion bid for the American oil company Unocal two weeks ago, topping a previous offer of $16.5 billion from Chevron, a political storm was inevitable. The Chinese government owns seventy per cent of cnooc (pronounced "see-nook"), and, for many in Washington, China is a natural enemy in the making. Representative Joe Barton said that the deal "poses a clear threat to the energy and national security of the United States." Representative Richard Pombo prophesied "disastrous consequences." A host of congressmen argued that the Committee on Foreign Investments--a government body that vets corporate acquisitions by foreign companies with an eye toward national security--should investigate the deal.

Some of this hostility is a matter of simple protectionism. While the U.S. has historically been a leading advocate of free trade, foreign intrusions on American shores are rarely welcomed. The current flap calls to mind the outcry that greeted Sony's purchase of Columbia Pictures, in 1989--a precious national resource in the hands of the Japanese! But people find the oil deal particularly upsetting because it unites two of the age's greatest causes for anxiety: oil and China.

People are worried about oil because prices are high, demand (from China, in part) is up, and supply may be dwindling. The assumption is that if China buys natural-gas and oil reserves it gets stronger and America gets weaker. But that's not actually how the global oil market works. To begin with, Unocal is not "an American energy asset," as Representative Pombo said last week. The United States does not own or control Unocal and has no claim on the company's gas and oil reserves, which are dotted across the globe. And Unocal does not reserve its oil for American consumers. Like every other oil company, it sells to the highest bidder. In the end, its responsibility is to its shareholders, not to American national security, as some of Unocal's recent activities (such as working with the Taliban on a potential pipeline) might indicate.

More important, in today's world whether or not you own the means of oil production doesn't affect your access to the stuff. Oil trades in a world market, and every player buys and sells at effectively the same price. The United States, as a nation, does not own any oil companies, but Americans can still buy all the oil they need. (That may change someday, but, if it does, access to oil will be determined by whose army is strongest, not by whose name is on a lease.) Some congressmen have suggested that if cnooc succeeds in its bid it will take Unocal's oil and send the oil to China alone. Even supposing cnooc did this, it wouldn't affect American consumers. Unocal provides less than one per cent of the oil consumed in this country. Moreover, if Unocal's oil went exclusively to China, the Chinese would buy less oil from other ...