Happy Dependence Day to Mid-East Oil and China!

This past Independence Day, a mostly overlooked news story was China becoming the largest benefactor of American blood and treasure spent in Iraq (~5,000 soldier deaths and $1.9 trillion) -- as China is now Iraq's #1 oil customer (purchasing ~50% of Iraqi oil with expectations that this will increase).

But this story line isn't limited to Iraq, as China is now also the #1 oil customer of many oil exporting countries in the Persian Gulf -- benefiting from U.S. military protection of the Region's oil supplies (with an estimated U.S. cost of ~$8 trillion during the past 3 decades -- about $27,000 per each U.S. Citizen).

Since Chinese Oil Companies are controlled by their central Government, this shouldn't come as a shock. Unlike U.S. and other Western Oil Companies, China is not driven by shareholder profit but national interest to fuel their economic growth. Simply stated, China is willing to pay more to develop these oil resources than western multi-national corporations (e.g., Exxon, Shell, BP, etc.). Even by paying more for oil, China will still retain a competitive advantage over most U.S. manufactured goods as a result of their cheaper labor, currency devaluation (Yen), and lax environmental regulation (including carbon dioxide).

The below graphic from the U.S. Energy Information Agency is a timeline depiction of Chinese oil consumption that has been needed to fuel their staggering economic growth during the past +30 years:

As Americans now prepare for the likelihood of even more war in the Middle-East, the footprint of oil re-surfaces yet again -- with recent news reports that Iran (through Russia) has been funneling billions of dollars to the dictator Assad to develop oil resources in Syria.

Starting with the funding for the 9/11 World Trade Center attack (Saudi Arabian sources) to the current deadly civil war in Syria -- a common denominator just always seems to be oil money that supports international terrorism and wars for political/religious control in the Region.

This Labor Day as the U.S. prepares for war, Americans should remember that every time we fill up our gas tanks: Through the hard earned money of our labor -- we are supporting this unending madness and opportunism for China to exploit.

While U.S. foreign oil dependence has significantly decreased in the last few years due to technology advancements in hydraulic fracturing (where its long-term impact on water resources is uncertain), we should not lose sight that the U.S. still imports a tremendous amount of oil -- much of which comes from volatile OPEC countries.

To put this into context, U.S. oil imports from OPEC in 2012 approximately equaled or exceeded the "total oil consumption" of other leading industrialized countries:

U.S. OPEC Imports Versus Total Oil
Consumption of Major Countries This Labor Day as we celebrate the "American Spirit" of hard work, creativity, opportunity, and resolve, it should be recognized that ethanol is a perfect example of this "Spirit" -- and just how far we've come in such a short period of about 10 years. Unfortunately, many politicians today want us to go back to the "Good Old Days" of dirtier fuel and greater fossil fuel dependence by rescinding Renewable Fuel Standards. These politicians would also abandon the vision to dramatically increase auto fuel economy (54.5 MPG) through the development of highly efficient, smaller turbo-boost engines (requiring the high octane found in ethanol).

The next time you hear an opportunist politician rail about "Big Government forcing ethanol down consumer's throats" -- think about which picture of values you want to support when you fill up your gas tank.