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How China is Using the COVID Crisis to Turn American Oil Red

Chinese firms buying up our producers could be a deadly side effect of the current health crisis.
Oil Well

If Texas was its own country, it would be the world’s third largest oil producer. Only Russia and Saudi Arabia produce more oil per day than the Lone Star State.

Right up until coronavirus crashed the world’s economy, this was seen as an unalloyed success. America was becoming energy independent. We were producing so much oil that we’d gone from being a massive oil importer to a crucial exporter. And with energy independence comes enhanced national security. A stronger American oil production industry led to lower and stabler energy prices.

But the coronavirus and the Saudi-Russian oil price war have changed everything. Texas producers that were thriving just weeks ago are now reeling, laying off workers by the thousands and teetering on the edge of bankruptcy. Whiting Petroleum has become the first Texas producer to file for Chapter 11 in the wake of these two shocks. More will follow.

Bankruptcies and layoffs are bad enough. But there may be another even greater threat on the horizon.

As smaller and medium-sized producers lose revenue to falling oil prices, their value drops precipitously. This leaves them vulnerable to being bought up by larger firms.

It also leaves them vulnerable to takeover by foreign firms. There is no law preventing American oil producers weakened by the current market from being snapped up for pennies on the dollar by whatever or whoever can write a big enough check. Most of the world is reeling, including China. But China also has massive government-backed companies that probably have the juice to buy up American oil firms.

Lest anyone think I’m merely supplying nightmare fuel, foreign firms, including a mainland Chinese company, already operate in the Permian. One such firm is Surge Energy. In the United States, Surge is based in Houston. But it’s actually a creation and wholly owned subsidiary of Shandong Xinchao Energy Corp. Ltd. Shandong Xinchao is, as you may have guessed from the name, Chinese. It’s based in the coastal province of Shandong, across the Yellow Sea from the Korean peninsula, the birthplace of Confucius. China’s first home-built aircraft carrier is called the Shandong. It’s a strategically important province, and since 2015 it’s had a corporate hook in the Texas oilfields.

On its own, China produces less than five million barrels of oil per day, while consuming about 13 million barrels per day. That difference has to come from somewhere. China is, as we all have noticed lately, not a normal country. It’s a communist dictatorship. Shandong Xinchao Energy Corp. Ltd exists under the aegis of that more or less fascist public-private system, which has empowered China to become the world’s second largest economy. China’s viral lies are harming the entire world’s ability to function. And that’s driving the price of oil down to historic lows, which in turn is driving the value of oil producers down, leaving them vulnerable to takeover.

Surge Energy is not a bit player in the Permian. It’s among the top 20 Texas producers, pulling about 2 percent of the total oil out of the ground. Smaller producers than Surge have made billionaires in the Permian.

I am not suggesting in any way that the virus is some kind of conspiracy to enable China to buy up the Permian. But enabling Chinese and other foreign firms to purchase distressed Texas oil producers may well be one of its side effects. If that happens, there goes our energy independence, economic security, and national security.

The oil under our land is a national security asset and an economic asset. You cannot power the modern world or a modern military without oil. You cannot manufacture thousands of the products we take for granted without oil. Oil makes the world go ‘round.

The mere possibility that a power as opaque, dishonest, and hostile as communist China could use the present crisis to make significant—permanent—ownership changes in Texas oil country should deeply concern us all.

A.J. Rice is CEO of Publius PR, a premier communications firm in Washington D.C. Rice has produced or promoted Laura Ingraham, Donald Trump Jr., Judge Jeanine Pirro, Monica Crowley, Charles Krauthammer, Alan Dershowitz, Roger L. Simon, Steve Hilton, Victor Davis Hanson, and many others. Find out more at publiuspr.com

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