China/Vietnam/South China Sea: What Do Weak Oil Prices Mean for the South China Sea?

Jan 21, 2015 | David Tweed, Bloomberg
View Original

When it comes to territorial tensions in the South China Sea, it’s more about what goes through it than what lies beneath it.

Oil last week dropped below $46 a barrel to more than five-year lows. The biggest collapse in energy prices since the 2008 global recession has prompted companies from Royal Dutch Shell Plc to Norway’s Statoil ASA to scrap projects not considered viable at current prices and drawn attention to the future of costly deep-sea exploration.

Yet in the South China Sea, where Chinese and Vietnamese boats clashed last May after China parked an oil rig in disputed waters, political and security considerations will keep territorial tensions simmering, fueling military spending by countries that border the area. The South China Sea contains some of the world’s busiest shipping lanes and is a vital artery for China’s energy supplies from the Middle East.