China’s clean energy push has made it less vulnerable to energy shocks, including the Iran war
When Gary Dirks arrived in China in 1995, the country’s government was looking to source more of its energy at home. Dirks was the incoming country head for BP, but efforts to find more oil and gas in the country had largely fizzled.
So government leaders pivoted, Dirks said. China invested heavily in its domestic coal and, later, in building wind and solar energy. Now, those investments and other steps are shielding China from more severe impacts of the volatility unleashed by the U.S.-Israeli war in Iran, despite Beijing’s continued reliance on foreign oil.
“They’ve been taking measures for a very long time to try to maximize their use of their own resources,” said Dirks, now senior director at the Global Futures Laboratory at Arizona State University. “They’ve been aware of this vulnerability for a very long time.”
By some measures, China could appear to be highly exposed to the price spikes and supply disruptions the war has sparked in global oil and gas markets. The country gets nearly half of its oil and one-third of its liquefied natural gas, or LNG, from the Middle East, according to an analysis of data by Columbia University’s Center on Global Energy Policy.
Yet China has built up a crude oil stockpile of nearly 1.4 billion barrels, meaning the country could be cut off from imports for months, “and they’d be OK,” said Erica Downs, a senior research scholar at the Center on Global Energy Policy.
China is more vulnerable with natural gas, for which it doesn’t have such a substantial stockpile, experts say. Because the war has caused prices in Asia to spike, some industrial users in China, like chemical or glass plants, will need to pay more, cut back their operations or both.
“There is definitely going to be short-term pain,” Downs said. “But I think in the longer term there are definitely some silver linings for China.”
In an essay in Foreign Policy written with Jason Bordoff, the founding director of the Center on Global Energy Policy, Downs argued that while the war has exposed China’s dependence on Middle Eastern oil, “it also underscores how deliberately Beijing has sought to prepare for a world in which energy security is inseparable from geopolitics—by electrifying its economy, securing domestic sources of energy, amassing stockpiles, and dominating clean technology supply chains.” [Continue reading…]