The line that separates market factors from political ones has gotten blurred indeed. By the time you read this, the bidding war over Unocal's Asian assets may have concluded, but the contest raises important issues, whatever the outcome. Was it a sign of the maturation and sophistication of a Chinese E&P company led by a CEO who trained at USC, or the first volley in an economic cold war for the 21st century? Opponents said CNOOC's intent to buy Unocal was a political move funded indirectly by a government (a communist one at that), not a commercial move. Not fair, they said. Strategically-maybe even militarily-too dangerous, they said. But it made sense. Unocal provides only 1% of U.S. energy needs. And look at China's actions on the playing field. From Sudan and Russia to Alberta's oil sands, its politicians and oil executives have been meeting, negotiating and buying reserves and acreage. They have no choice. Like it or not, their inexorable demographics will affect the world's economy and speed up the race for natural resources to fuel it. This huge ship cannot easily be reversed, if indeed it ever can. Tom Petrie of Petrie Parkman & Co. speaks of "Chindia," referring to the surging populations and economies of two giants. Experts now think China's oil-demand growth may slow down a bit after being on a tear for the past two years. In July, the International Energy Agency (IEA) cut its projection for Chinese demand growth for 2005, but still finds that China will require another 360,000 barrels per day this year. In 2006, Chinese oil demand will rise another 7.2% or by another 490,000 barrels per day, the IEA says. It's no wonder. The number of private cars in Beijing has increased 140% since 1997 and in the whole country, has surpassed 25 million. And, oil demand is not just a matter of gasoline trends. Petrochemicals are in play here. These days, Wal-Mart has 46 stores in China full of new consumers and it plans to double the number of stores soon. A Goldman Sachs & Co. report says that in a decade, the middle classes of Brazil, Russia and Chindia could total 800 million people-that's more than the combined population of the U.S., Western Europe and Japan today. Let's be wildly conservative and suppose that oil demand in these "emerging" nations does not grow appreciably from where it is today. That's still a huge call on output from all oil producing nations around the globe, that wasn't there five years ago. How much oil is needed? That's the dicey question. The IEA just raised its forecast for global oil demand in this year's fourth quarter to 86.4 million barrels per day. At press time, however, OPEC revised downward its own global demand expectation, to 83.7 million barrels. If that's accurate, it is still an increase of 2% from 2004 demand. Experts can argue over how much demand there is, but the thing to note is that demand has risen above 2003 and 2004 levels despite $50 to $60 oil. We apparently have not tested the limit of consumer tolerance-yet. The price of West Texas Intermediate oil is up 38% this year, yet U.S. gasoline demand so far has not abated. In fact, it was up 2.2% year-to-date as of July! In mid-July, Federal Reserve chairman Alan Greenspan said he was not too worried about higher oil prices, although admitting they have dampened consumer activity a bit. A Fed study clarifies that-the increase in oil prices since 2003 will cut U.S. gross domestic product this year by a mere three-fourths of one percent, according to written remarks sent to the Joint Economic Committee of Congress. High oil prices seem a sure bet in the near term, even though non-OPEC production is poised to grow to 2010. Mexico and Norway said this summer that they cannot produce any more at this time. Neither can the U.S. or U.K. OPEC's official production quota as of June was 28 million barrels per day, yet the group admitted it pumped 30 million a day that month. And prices still rose, passing $60 on June 27. That same day, the Bangor, Maine, newspaper published a front-page article proposing to use Maine's potato crop for ethanol production. Two days later in Washington, D.C., a Saudi Aramco official told the Center for Strategic and International Studies that the kingdom is taking steps to boost production. Some 300,000 barrels per day from one field come onstream in 2006. Another 500,000 are due from three fields in 2007. And so on. The plan is to add 1.5 million barrels per day by 2009, to push production to 12 million per day. We'll see if that is enough.