Many countries worldwide have been hit hard by the energy crisis that has emerged following the U.S.-Israeli attacks on Iran and ensuing conflict, with severe oil and gas shortages driving energy prices sky high. But while some countries are suffering badly, China so far appears relatively untarnished, following several years of preparation aimed at boosting the Asian giant’s energy and national security and reducing reliance on foreign powers.
China has been stockpiling vast quantities of oil in recent years, with a 1.3-billion-barrel strategic crude reserve, enough for several months. It has also rapidly developed its renewable energy capacity, including solar, wind, and hydropower, in support of an eventual green transition.
This has led China’s refined oil, diesel, and gasoline demand to fall for two consecutive years, thereby reducing the country’s reliance on oil imports and making experts believe that China’s oil and gas demand may have peaked. China also dominates the mining and refining of a wide range of critical minerals and has become a major electric vehicle (EV) and battery producer.
In addition to preparing its energy sector for any shock that might come its way, China has also rapidly been building up its industry to strengthen its hold on global supply chains. This has been particularly important for China’s economy over the last year, following the introduction of high U.S. tariffs on the import of Chinese goods by President Donald Trump. This has led China to become increasingly self-sufficient in recent years.
With the major Strait of Hormuz gateway between Asia and Europe largely shut off, greatly limiting the transport of oil and LNG, China has so far proved more resilient than many other countries in managing its energy. China’s energy development in recent years means that it can now power many of its cars and trains with electricity, helping to reduce its dependence on oil.
Meanwhile, several other Asian countries, such as Vietnam and the Philippines, are battling with severe oil and fuel shortages due to the ongoing Middle East conflict, an issue that China is attempting to address. In March, China made a shipment of 260,000 barrels of diesel and 100,000 barrels of distillate fuels to the Philippines and Vietnam to help alleviate the shortages.
All of this is not to say that China is totally self-sufficient when it comes to energy, with Beijing still importing three-quarters of its oil demand, as well as much of its gas. In fact, China’s oil imports increased last year, as it purchased high levels of discounted crude from Iran and Russia. However, it is thought that the government also stockpiled a significant proportion of its crude imports.
During the Covid-19 pandemic, when the world experienced major supply chain disruptions and China’s relations with the United States worsened, the Chinese government established an official road map on how to weather the turbulent period, which it published in the Communist Party’s Qiushi journal.
Despite pledging to reduce its reliance on coal, as part of its aims for a green transition, China has used coal as a stopgap to reduce reliance on oil imports. The government has increased the use of coal to produce petrochemicals, to provide an alternative to a dependence on oil imports, for example. The government’s use of coal to make chemicals increased from 155 million tons in 2020 to 276 million tons in 2024. China aims to eventually shift reliance away from fossil fuels towards renewable alternatives, but, for now, its continued use of coal is helping the country to become more self-sufficient and to develop its industries.
One example in which China has become more resilient is in the production of nitrogen fertiliser. China contributes around one-third of the global supply of the fertiliser, roughly 80 percent of which is produced using coal. While global fertiliser prices have been edging upwards since the start of the Iran war, the price of China’s domestic production of the fuel has remained stable.
In early April, China’s President Xi Jinping called for the accelerated planning and construction of a new energy system, following the disruption of global energy supply chains because of the Middle East conflict. Xi stressed the importance of hydropower development and ecological protection, as well as the need to safely expand nuclear power.
“Our pioneering development of wind and solar power has now proven to be forward-thinking. At the same time, coal-fired power remains the foundation of our energy and should continue to play a supporting role,” Xi stated. The president called for a greener and more diversified, resilient new energy system.
China has spent several years preparing for the event of a global energy crisis and is well-positioned to weather several months of energy shortages and higher fuel prices. Now, President Xi is calling on the rest of the world to follow in its footsteps and rapidly diversify its energy mix to boost the world’s energy security.
By Felicity Bradstock for Oilprice.com