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Divide and Conquer

Written by Luke Burgess
Posted August 26, 2005

Dear Wealth Daily reader:

There's an old political maxim that says: "When your opponent is self-destructing, get out of his way."

That's how China views America at the moment.

In Iraq, "the flies have effectively caught the flypaper." With the US caught up in Iraq, China has gone shopping around the world for oil assets. The communist country was initially unsuccessful with Unocal. But their latest prize is PetroKaz.

Now China is looking into the heart of darkness for more energy to feed its breakneck economy, Africa.

Earlier this year China forgave $1.3 billion in African debt and lifted certain tariffs on goods imported from 25 of Africa's least-developed countries.

Now senior African officials are in Beijing to discuss China's large trade surpluses. But China certainly has few problems with any countries with oil to sell.

Last month the Nigerian National Petroleum Corporation agreed to sell 30,000 barrels of crude a day to China.

Also PetroChina submitted bids for two oil blocks in the 2005 licensing opening this month and has expressed interest in taking over the Kaduna Refinery and Petrochemicals.

State-owned China National Petroleum Company has already invested $14.4 billion in oil projects in Sudan, which accounts for 6% Chinese imports.

CNPC has sent 10,000 Chinese workers to build a 900-mile pipeline to Port Sudan on the Red Sea. CNPC has interests in Algeria and is involved in building a pipeline in Libya.

But China's interests in Africa goes beyond oil. Africa is also a key source for raw materials, such as gold, aluminum, platinum, and iron ore.

In this little world of horror, China is the Audrey II of the planet. The more we feed her, the bigger and hungrier she gets.

Hawaii Imposes Gas Cap

Next week Hawaii will begin enforcing a cap on the wholesale price of gasoline, hoping to ease the pain of soaring costs at the pumps.

It will be the first time a state has imposed limits on gasoline prices since the energy crisis of the 1970s and comes as retail fuel prices soar to record highs. But critics warn that the cap could lead to supply shortages.

The state Public Utilities Commission said the initial price ceiling is due to take effect Sept. 1.

Gasoline prices in Hawaii are the highest in the nation, averaging $2.846 per gallon. Prices on Maui have already topped $3 a gallon this week.

The PUC has set the first cap at $2.1578 per gallon, or about $2.76 including taxes in Honolulu for regular unleaded gas.

The ceilings will be in effect through Sept. 4. The following week, the commission will announce a new set of caps.

While it may be tempting to put the cap on rising gas prices, experts call it a short term fix, and a long term disaster.

-Luke Burgess
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