Mark R. Cristino/EPA
China has long been banking on renewable energy and domestic oil reserves to protect itself in the event of an oil shock. However, Beijing will not be immune to the impact if the conflict drags on for more than a few months.
China has been preparing for a possible oil supply shock of the Persian Gulf. But the disruption of the strategic sea route through the Strait of Hormuz, caused by the war in Iran, is putting this resilience to the test.
Oil and gas exports from the Middle East were halted after Iran threatened respond to American and Israeli attacks with their own attacks on ships crossing the strait.
The blockade has caused a global oil shortage that has hit Asian countries that depend on Gulf routes.
The Philippines imposed four-day work weeks to save fuel and Indonesia is looking for ways to avoid running out of its reserves, which are only enough for a few weeks.
And as the world’s largest oil importer, China also feels the same pressure.
But Beijing starts from a stronger position than its neighborsafter years of diplomacy and strategic planning, aimed at preparing for a global energy crisis.
Test for Chinese power grid
The world economy has entered a phase of turbulence since the United States and Israel launched attacks against Iran at the end of February.
Oil prices have soared in recent weeks, reaching close to 120 dollars per barrel at some moments. They were driven by attacks on ships and energy infrastructure. Not to mention the effective closure of the Strait of Hormuz, the world’s most heavily trafficked sea route for oil transport.
They pass through the strait about 20% of the world’s oilor around 20 million barrels per day, according to estimates from the United States Energy Information Administration (EIA).
The shortage forced countries to look for alternative suppliers outside the Persian Gulf, while others began to draw on its own strategic reserves.
China is the second largest consumer of oil in the world, after the United States. The Asian country consumes between 15 and 16 million barrels per dayaccording to several market analysts consulted by the BBC.
Most of it goes to your vast transport systemmade up of cars, trucks and planes. And much of the oil consumed comes from abroad.
The Gulf countries are an important source of the oil that reaches China. Saudi Arabia and Iran each represent more than 10% of imports Chinese, according to EIA data.
Most of the oil imported by China comes from Iran and the Middle East, through the South China Sea. It is used as fuel to maintain factory activities and transportation, especially in the southern half of the country.
The north depends mainly on oil extracted from oil fields in Chinese territory, in addition to pipeline imports from Russiawhich were not affected by the war in the Middle East.
While many Asian countries depend largely on oil from Gulf countries, the Russian oil represents about 20% of imports Chinese. As a result, Moscow became Beijing’s largest oil supplier, even with sanctions imposed by the United States and Europe.
Coal continues to be the main source of electricity generation in China and is abundant in the country. THE China is the world’s largest coal producer and concentrates more than half of global production.
Oil and gas, on the other hand, represent just over 25% of the Chinese energy matrix as a whole, according to estimates published in the state press. This number indicates that the country depends less on these resources than Europe or the United States.
Preparing for difficult times
Beijing has for years taken advantage of low oil prices and abundant supplies from Gulf countries to form one of the largest reserves in the worldexplains Saxo Bank’s head of raw materials strategy, Ole Hansen.
Between January and February this year alone, China purchased 16% more oil than in the same period the previous year, according to the country’s customs administration.
Iran’s oil is subject to sanctions from the United States, but the Islamic Republic has become one of the top suppliers of cheap oil to China. Several reports indicate that Beijing buys more than 80% of Iranian oil exports.
Ship tracking data collected since the start of the war in Iran indicates that some of that oil continues to reach China, but analysts disagree about the exact size of China’s oil reserves.
According to business analytics group Kpler, more than 46 million barrels of Iranian oil are currently stored in tankers along the South China Sea. They are enough to cover several days’ consumption.
Hansen says estimates indicate that China has accumulated reserves of about 900 million barrelsequivalent to just under three months of imports.
Figures from Columbia University, mentioned by the Chinese state press, increase the country’s oil reserves to around 1.4 billion barrels.
It is also not known for sure how much imported energy China consumes per day and how much is diverted to its strategic reserves, highlights Hansen. Still, the total volume forms a “substantial mattress” in times of supply interruption.
Despite having considerable reserves, Beijing has demonstrated caution signs to manage your short-term supply.
There is information that Chinese authorities have ordered the country’s refineries to temporarily suspend export of fuels, to try to contain domestic prices.
The BBC consulted the Chinese government in this regard, but received no response.
China’s quest for self-sufficiency
China became world leader in green energy productionwith the accelerated installation of wind and solar farms across the country.
Beijing’s National Bureau of Statistics indicates that wind, nuclear, solar and hydropower will generate more than a third of China’s electricity by 2025.
Since then, China has considerably expanded its renewable energy network. Estimates indicate that more than half of its installed capacity currently comes from clean sources.
And, as a result of this push for renewable energy, oil represented only about 20% of total energy consumption of the country in 2024. And the demand for oil is unlikely to increase again in the future, according to the International Energy Agency (IEA).
Energy economics researcher Roger Fouquet highlights that China’s “ambitious” transition towards renewable energy does not only respond to environmental motivations but also contributed to protecting its economy against global risks, such as those seen in the conflict in Iran.
“In a way, China was lucky to have started investing in renewable energy 25 years ago,” he explains. “And now, he is reaping the rewards.”
Electric vehicles represent at least a third of new cars sold in the country and have also helped reduce China’s dependence on oil, according to Roc Shi of the University of Technology Sydney in Australia.
“This means that the owner of an electric vehicle in Beijing simply don’t feel the impact at the fuel pump when tension increases in the Middle East,” he explains. “Their mobility costs are not related to international oil markets.”
But that doesn’t mean the Chinese economy is immune to oil supply disruptions.
For electric vehicle owners, charging costs can increase during an energy crisisif fuel prices increase.
Last week, the prices of gasoline and diesel fuel increased by 695 yuan (about 100 dollars) and 670 yuan (about 97 dollars) per ton, respectively, according to the state-run China Daily newspaper, which cited an official report.
In the case of Chinese factories, the rise in oil prices could also increase the costs of the country’s huge petrochemical industry, responsible for the production of plastics, fertilizers and other chemical products.
China, as the world’s largest energy importer, will now pay a higher price per barrel due to the war, according to Shi. But you will have no choice but to assume this additional cost.
