Crude Behavior

WASHINGTON, D.C.—The growing oil panic reared its head in the Japan-China feud Tuesday when Tokyo announced it would be issuing gas leases in the East China Sea, which lies between the two countries. China responded by accusing Japan of stealing the offshore gas fields.

The right to gas in these waters is of considerable importance to both nations, which are heavily dependent on imported fuels, especially from the Persian Gulf. Neither side appears willing to compromise. According to the BBC, China has been running surveys of the contested area and refusing to tell the Japanese what's going on. Not to be outdone, Japan made the decision to hand out drilling rights the day after Beijing warned against precisely that course of action.

This comes in the wake of mass protests in China last weekend over Japan's approval of new history textbooks. The Chinese claim the books downplay Japanese brutality during wartime. (Japanese foreign minister Nobutaka Machimura will go to Bejing this weekend to try and resolve the issue.) In light of the protests, Chinese Premier Wen Jiabao said that Tokyo ought to "have deep and profound reflections" about its efforts to get on the UN Security Council. Meanwhile, Wen had just returned from India, where he confirmed Chinese support for India's obtaining a Security Council seat.

In an effort to promote trade between the two countries, Wen and Indian Prime Minister Manmohan Singh agreed on a "strategic and cooperative partnership for peace and prosperity." In concrete terms that means a joint venture to build port facilities on the Indian Ocean, through which China's oil shipments travel. It also sets up a port-of-call for the small Chinese navy in waters dominated by the U.S. since the end of World War II.

Ration-al decisions

There are several reports predicting imminent and sharp decline of petroleum reserves. The latest comes from the Bank of Montreal, according to Al Jazeera, where an analyst says the world's biggest oil field, Saudi Arabia's Gharwar, is in irreversible decline.

For the first time there is talk of a need to forcibly ration fuel supplies. Rationing would depend on international agreements, normally organized through the UN. But with the Bush administration's animosity towards the world body, that seems highly unlikely.

If it ever becomes necessary to ration there would be sudden and heavy pressure in the U.S. to throw environmental concerns out the window and go all out for oil and gas in Alaska, the Canadian north, and Mexico. Gas might be taken in larger quantities from the Caribbean and possibly under the waters off the Northeast coast. What's left of oil and gas reserves under the U.S. continental shelf would be up for grabs.

Laissez faire-minded politicians would probably argue that the soaring price of gasoline and natural gas is a form of rationing, but with the economy in rickety shape, oil-driven inflation could spell recession or worse. While OPEC denies any decline and issues rosy forecasts of increasing production, oil experts have have begun to doubt the organization's reserve figures.

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