As China focuses on modernizing its energy infrastructure in the transition away from coal towards renewable energy sources, it still also relies on oil imports for energy security.
[China leads the world in wind capacity (65%), solar capacity (60%) and hydropower (31%). China is second globally after the U.S. in nuclear power generation (13.5%)].
The U.S. Congress has introduced legislation prohibiting China from purchasing oil from the U.S. Strategic Petroleum Reserve. This move reflects a more aggressive stance by the U.S. in escalating its economic war on China. The United States, the world’s largest oil producer, has increased its crude oil production significantly, reaching a historic high of 13.3 million barrels per day in 2023.
China’s strategic shift in its oil import sources is reshaping the global landscape, favoring ties with BRICS nations. Trade tensions and political disputes with the U.S. have made American oil a risky option for China, prompting diversification of their suppliers. This pragmatic strategy aims to mitigate potential economic and social disruptions from future sanctions or trade barriers.
China is also conducting much of its oil trade in currencies other than the U.S. dollar, gradually undermining the dollar’s dominance and enhancing its economic sovereignty. In 2023, China’s primary oil suppliers were Russia, Saudi Arabia, Malaysia, Iraq, and the UAE. Russia topped the list, supplying 18.33% of China’s total crude oil needs. Saudi Arabia followed, contributing 10.7% of the imports.
This dynamic shift highlights China’s efforts to build robust connections with emerging economies, challenging traditional oil trade dynamics.
The reduction in demand for U.S. oil could impact the American economy, affecting jobs and investments within the oil sector. Historically, oil trade has reinforced the U.S. dollar’s global strength. However, as China and other countries trade oil in alternative currencies, the dollar’s dominance faces challenges.
China’s evolving energy strategy, including investments in renewable energy, aims to reduce dependence on imported fossil fuels and position China as a leader in the global transition to sustainable energy. This strategic move has significant implications for the U.S. economy and global influence.
Source: Vision of China, July 13, 2024. https://youtu.be/psO8Se24ql4?t=320