Game Change: Chinese Shale Reserves

By now you'll likely know, America will achieve energy independence by 2035. America, however, is not alone. Enough shale has been found in Lancashire to power Britain for 65 years.

Good news is likely to come China's way too. We already know China has ample shale reserves. Indeed, China has the largest reserves in the world and is looking to copy America's success story.

This changes things. At present roughly 80% of Chinese oil supplies pass through the Straits of Malacca. China has always been uncomfortable with this fact. Hence its many pipeline projects.

The Malacca choke point meant China had to behave in disputes with neighbors. Vietnam, the Philippines, and India might not be the most formidable of foes, but they didn't have to be.

As Chinese shale comes online, China can afford to become more aggressive in territorial disputes. This offers a more interesting explanation for the recent dispute with Japan. Some theorize the dispute is a consequence of the leadership transition; no Chinese leader can afford to appear weak. This is a plausible explanation, but I'm beginning to doubt it, the reasons why though are a tangent for another time.

 One thing is certain though, China's shale reserves gives it increased flexibility, its multiple pipeline projects gives it even more flexibility. Countries in the region doubtless realize this; China will become more aggressive in territorial disputes.

The gloves aren't completely off though. China's economy still needs the seas for export. So what we'll see is assertiveness not ham-fisted hostility.

These developments also change things in the Middle East and Russia. The Spectator discusses these issues. 



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What troubles is Australia's defense cuts. If my narrative is correct, this is hardly the time to pare down defense spending. This, however, makes the Trans-Pacific Partnership all the more important. We need to get countries with the region trading with one another; as a means of increasing their common interest. These countries have long been hedging their bets. Will they continue to do so? Does it matter?

Last summer there was a similar dispute between China and the Philippines. That dispute ended at the start of typhoon season. After the season the issue never got much media play. And for good reason; China can't start alienating countries in Southeast Asia. When will the Diaoyu islands be placed on the back burner? Your guess is as good as mine. Why didn't they make the Philippines dispute a bigger deal? They must of had an inkling of their shale reserves. Institutions are sticky. Someone in the foreign ministry must have put a damper on things. This probably happened at a lower level. The dispute gets kicked up a pay-grade or two. There's a thorough review. Policy is changed. Diaoyu ideal trial run in some ways; real hatred for the Japanese in country; in region? Possibly.