China\u2019s strategy is being put to the test as oil prices climb and US President Donald Trump sends mixed signals about how long the war on Iran will continue. <\/p>\n
While the Chinese economy like others around the world faces major challenges from increased energy costs, the country may be positioned to ultimately leverage geopolitical opportunity out of the crisis. <\/p>\n
China\u2019s recent energy investments make it particularly resilient to fossil fuel price shocks compared with nations that have not kept pace in growing and diversifying their energy economies – including the US and its allies in Europe.<\/p>\n
\u201cPeople out there tweeting that this is destabilising China may be wishing that were the case, but tweets are not reality,\u201d said Josh Freed, head of climate and energy at Third Way, a centre-left think-tank. \u201cThis is a shock China can absorb. It will end up in a stronger position on the other side.\u201d<\/p>\n
Successive US presidents have talked about pursuing an \u201call-of-the-above\u201d energy strategy, a phrase that was used by President Barack Obama and more recently by Trump to pledge investment into an array of different energy sources. But US leaders have struggled to find the resources and political will to fully execute on that ideal.<\/p>\n
Trump\u2019s recent attacks on wind and solar power, as well as electric vehicles, have allowed China to pull further ahead in leading those sectors as an exporter and a user. <\/p>\n
The US Strategic Petroleum Reserve was drawn down considerably under the Biden administration, and its restrictions on permits for new liquefied natural gas exporting facilities angered the industry. Every recent US administration has promised a new generation of cost-efficient nuclear plants but struggled to build any, while China breaks ground on many new reactors.<\/p>\n
China\u2019s years of steady and increasing investment have left it with huge capacity to absorb energy shocks. <\/p>\n
The country\u2019s domestic production of oil covers only about a quarter of its needs, but its stockpiles of oil dwarf those of the US, with an estimated 1.3 billion barrels in reserve, according to analyst firm Kpler. <\/p>\n
That is enough to backfill more than six months of disruption of China\u2019s supply via the Strait of Hormuz, where the tankers that once shipped half of the country\u2019s oil imports and a third of the foreign natural gas it buys have been paralysed by Iran\u2019s attacks in the region.<\/p>\n
China has also been rapidly building new coal plants in recent years and now has so many that they do not need to run at full capacity. That spare power generation can be fired up to help limit interruptions to heavy industry and its power grid.<\/p>\n
\u201cThey have an abundance of domestic coal,\u201d said Ben Cahill, director for energy markets and policy at the Centre for Energy and Environmental Systems Analysis at the University of Texas at Austin. <\/p>\n
\u201cChina has strategised to protect itself from risks associated with imported fossil fuels. They see it as a vulnerability to be overly dependent on imported energy.\u201d<\/p>\n
Efforts to minimise use of imported fuels before the next crisis erupted have been a centrepiece of that strategy.<\/p>\n
Rocket trails are seen in the sky above the Israeli coastal city of Tel Aviv amid a fresh barrage of Iranian missile attacks on March 11. Photo \/ Jack Guez, AFP<\/p>\n
Roughly one-third of China\u2019s total energy consumption now comes from electricity, according to the Centre on Global Energy Policy at Columbia University, 50% higher than the global average. More than a third of that electricity comes from solar, wind and hydropower – generally built with components from Chinese factories that are also exported around the world.<\/p>\n
China is also a leader in making and adopting electric vehicles. A majority of cars sold in the country are now EVs, and drivers in other nations are clamouring to buy Chinese models.<\/p>\n
These pivots from gas and oil-fuelled engines and power plants have, according to the International Energy Agency, enabled China to severely curb its growth in fossil fuel consumption, avoiding what would have been 1.2 million barrels of new daily oil demand since 2019. Natural gas accounts for just 4% of power generation in China, according to the Oxford Institute for Energy Studies.<\/p>\n
\u201cWhen you look at everything China has done, it has hedged its exposure in a way that few other countries have,\u201d said Michal Meidan, director of the China energy programme at the Oxford Institute for Energy Studies. \u201cIts power system is relatively insulated from these shocks.\u201d<\/p>\n
The US has struggled to tap into global enthusiasm for electric vehicles and neglected its power grid to the point where electricity prices are spiking around the country and tech companies can\u2019t find the energy needed to power their AI ambitions. <\/p>\n
Trump has recently depressed growth in wind and solar energy by blocking nearly complete projects and cutting incentives that encourage development of renewable energy.<\/p>\n
No country is going unscathed in the energy crisis triggered by the US and Israeli assault on Iran, and China is no exception.<\/p>\n
Despite its efforts to move its factories off oil and gas, some industries have not yet found viable substitutes. <\/p>\n
Imported fossil fuels are still needed to power manufacturing plants and provide ingredients needed to make other products. Making the glass for solar panels and manufacturing the giant grid batteries that China installs domestically and exports overseas requires chemicals derived from oil and gas.<\/p>\n
\u201cThey are still going to need a lot of oil and gas for their industries,\u201d said Sarah Ladislaw, a former senior director for climate and energy at the National Security Council under the Biden administration, who now runs the New Energy Industrial Strategy Centre, a think-tank. <\/p>\n
She added that the current disruption could also drive countries around the world to look for innovations that power manufacturing with clean energy, another area where China is already investing heavily.<\/p>\n
China may also benefit from the energy shock from the Iran conflict by appearing to be a more acceptable partner for building out renewable energy.<\/p>\n
\u201cIf you are, say, in Europe, you might not have wanted to increase your dependence on China for all the stuff you need for electrification, like critical minerals and batteries and solar panels,\u201d said Jason Bordoff, the founding director of the Centre on Global Energy Policy. <\/p>\n
\u201cBut in a world where now the oil and gas market looks pretty risky, too, increasing dependence on China for energy may start to look a little different.\u201d<\/p>\n
How much China can capitalise on the current tumult in energy markets hinges on how long it lasts, and what direction it takes. <\/p>\n
A rapid restoration of stability in Iran and a reopening of the Strait of Hormuz would limit how dramatically this conflict shakes the world\u2019s energy economy.<\/p>\n
But the outlook for a speedy return to the way things were before Trump ordered attacks on Iran two weeks ago is rapidly dimming as the conflict escalates across the region and oil infrastructure and shipping has been attacked. <\/p>\n
Iran\u2019s newly appointed Supreme Leader, Ayatollah Mojtaba Khamenei, pledged in a written address that Tehran would keep retaliating and said the Strait of Hormuz would remain closed.<\/p>\n
Richard Nephew, a senior adviser on Iran in both the Biden and Obama administrations who is now a scholar at Columbia University, said a lengthy period of disruption would also create a valuable learning opportunity for China\u2019s leaders. <\/p>\n
Beijing\u2019s threats of \u201creunifying\u201d Taiwan have always raised questions about its dependence on foreign oil, because moving on the self-governed island would likely trigger an embargo of fuel deliveries.<\/p>\n
China is getting \u201ca dry run of what a boycott or embargo looks like if they ever try to take Taiwan\u201d, Nephew said, while also getting a chance to observe the US military\u2019s weaponry and tactics in action. <\/p>\n
\u201cThere are ways in which the Chinese could use this whole situation to their long-term advantage,\u201d he said.<\/p>\n
Sign up to Herald Premium Editor\u2019s Picks<\/a>, delivered straight to your inbox every Friday. Editor-in-Chief Murray Kirkness picks the week\u2019s best features, interviews and investigations. Sign up for Herald Premium here<\/a>.<\/p>\n","protected":false},"excerpt":{"rendered":"China\u2019s strategy is being put to the test as oil prices climb and US President Donald Trump sends…\n","protected":false},"author":2,"featured_media":330288,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[11],"tags":[9092,2300,1558,138,607,12817,177421,10668,219,177419,8223,30699,6871,305,221,68613,78,16609,302,7810,130,3025,111,139,69,4156,12937,51520,21501,1041,544,82789,9939,19063,14907,65890,177420,131,1555,9938,8982],"class_list":["post-330287","post","type-post","status-publish","format-standard","has-post-thumbnail","category-economy","tag-against","tag-asia","tag-been","tag-business","tag-china","tag-declared","tag-destined","tag-economic","tag-economy","tag-electrifying","tag-forces","tag-gulf","tag-has","tag-have","tag-how","tag-idle","tag-in","tag-iran","tag-its","tag-may","tag-more","tag-most","tag-new-zealand","tag-newzealand","tag-nz","tag-oil","tag-prices","tag-republicans","tag-reveal","tag-rival","tag-some","tag-spiking","tag-states","tag-strikes","tag-successful","tag-superpower","tag-tankers","tag-than","tag-threat","tag-united","tag-victory"],"_links":{"self":[{"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/posts\/330287","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/comments?post=330287"}],"version-history":[{"count":0,"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/posts\/330287\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/media\/330288"}],"wp:attachment":[{"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/media?parent=330287"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/categories?post=330287"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/tags?post=330287"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}