Unocal: Central planning a la USSA - Oil no fungible asset anymore

Saturday, July 02, 2005

Oil and oil companies are are at risk to lose the status of fungible assets after the US House of Representatives has called on the White House to block CNOOC's (China National Offshore Oil Company) 18.5 billion dollar bid for Unocal on Friday. The resolution said oil and gas are "strategic assets" and that a Chinese state-run firm's takeover "would threaten to impair the national security of the United States."
Investors - not only in Unocal but other energy firms as well - will probably vote with their feet if the US government denies them their right to yield the maximum return on their investment by selling to the highest bidder.
If the White House acts according to the wishes of the representatives the USA might avoid a threat to national security in a trade-off for the heightened threat of losing the world's trust into the propagated free market economy that seems to give way to central planning. Or will the administration compensate the shareholders for the difference of 2.2 billion dollars that lies between CNOOC's offer and the second-best bid?
Crude oil futures shot up 3.8 percent on these news and closed at almost 60 dollars. If this vote gets effected by the government of the US(S)A crude oil cannot be seen as a fungible asset anymore. See also this post "Free markets - Yes, No...Or A Bit Pregnant?"

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