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Made in China Hacking HIghlights US-China Competition for Energy

As Israel deals with a sharp rise in gasoline prices, US energy firms have been hacked, allegedly by China, highlighting a race for oil security.
By Amiel Ungar
First Publish: 2/10/2011, 4:18 PM / Last Update: 2/10/2011, 7:09 PM

 

Both the New York Times and the Wall Street Journal carried reports abouta "coordinated, covert and targeted" campaign of cyber espionage against major Western energy firms originating in China. This story sheds light on a new area of competition and tension between the United States and China- energy security. 

According to McAfee, known for its computer security software, hackers managed to break into the system of five major American energy companies and make off with highly sensitive internal documents including project financing and bidding. The source of the hacking was traced back to China and the FBI is involved. It is known that China has been developing sophisticated cyber warfare capabilities, although no specific charges were imputed to the Chinese government.

The fact that the targets were oil companies shows that we are dealing with a sensitive area. China (as well as India) is already experiencing a boom in private motor vehicles and this will only gather further impetus. In anticipation of energy requirements, China has been buying up oil resources. Recent billion dollar deals include the Cutbank Range shale gas field in British Columbia and the Syncrude oil sands project from Conoco Phillips. In its dealings in North America China is careful not to totally take over American companies but it acquires a major share of their assets.

In attempting to obtain energy security, China is a competitor of the United States and therefore the inside information obtained by the hackers could prove very useful. On the other hand, American business leaders believe that there exists a mutual American-Chinese interest to collaborate on the issues of oil security.

The Energy Security Leadership Council, which includes ranking US business people and retired security officials, including Dennis Blair, the former Director of National Intelligence, will be sending a delegation to China next month to see if the US and China can collaborate rather than drive up prices by unrestrained competition. The Chinese, as signaled by their embassy in Washington, welcome this dialogue in the hope that it can provide a win-win solution to both parties.

The Energy Security Leadership Council has also just put out a major report with proposals favoring mass transit, congestion charges and other measures to reduce use of private vehicles. The report argues that the main driver of future energy demand is the transportation sector and this demand will constitute a rising drain on American resources.

America is vulnerable to disruptions in oil supply. The American Navy spends between 10 and 13% of the current defense budget in guaranteeing the free flow of oil (with other nations reaping benefits as free riders) and the wars in Iraq and Afghanistan have resulted in an 175% increase in fuel use.

The report also ties oil prices to economic stability, claiming that recent recessions have been triggered by spikes in the price of oil. The Council in its report is even toying with the idea of charging drivers a fixed amount per mile traveled. All these measures are intended to reduce the use of private vehicle transport by Americans and encourage carpooling and the use of mass transport.