The Trans-Arabia Oil Pipeline to China
The Politics eZine - Oil Economics

When Bush finally steps down as President in 2009 (whoever replaces him doesn't technically become president until the January after the election) he will have left behind the greatest legacy in the history of energy production. More important than the invention of nuclear power stations, he will have brought oil across the middle-east all the way to China. Americans may have thought that THEY were going to get all that Iraqi oil, but they are sorely mistaken. Iraq's oil is going where it is the most profitable: China.

Americans subsidize their gasoline prices with taxes (mostly income taxes) in order to keep gasoline prices low (and thus keep transportation/food prices low and keep the American economy running smoothly).

Not so in China. In the United States the price of gasoline is currently (March 2006) about $1.71/gallon (but the real price is closer to $2.50 if you ignore subsidies), but in China it is closer to $4/gallon and keeps going up. The Chinese don't have taxes and there is no gas subsidies. The price flows more naturally, and the demand in China is HUGE!

Lets say you have a million gallons of gasoline to sell. You could sell it in the United States and make maybe $2.5 million, or you could sell it in China and make $4 million.

Its a bit like a bidding war, and China is simply bidding a lot more.

As oil tycoons, Bush and Cheney both understand this. They can do the math.

The current cost of oil is $60/barrel (slightly higher in China due to demand). One barrel of oil when refined makes 19.5 gallons of gasoline.

Thus after refining the oil into gasoline you now have 19.5 gallons of gasoline worth almost $80.

China currently uses 6.4 million barrels of oil per day and that statistic keeps growing. It is estimated to reach 20 million/day by 2010 (the Chinese have started buying cars like crazy) at which point it will actually pass the United States in oil usage and the price of oil by then will go up to $100/barrel and perhaps $6/gallon (about $120 for every 19.5 gallons). That is only 4 years away.

$80 X 6.4 million/day = $512 million/day. In 2010 it will be $120 X 20 million/day = $2.4 Billion/day.

By building a pipeline from Iraq all the way to China the UNOCAL Oil Company will be able to tap into the Chinese market and make literally billions of dollars/day.

Four years from now George W. Bush will be one of the richest men in the world.

The only remaining hurdle is to invade Iran and start building a pipeline across there too.

See also: Afghanistan.


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