This is why China can survive without Hormuz

China that is, the world’s largest importer of petrolium through it Strait of Hormuzis paradoxically also one of the best positioned countries to deal with the closure of this marine ‘highway’ of gas, crude oil and fertilizers.

China consumes huge amounts of oil from the Persian Gulf and imports roughly the same amount from the region as India, Japan and South Korea combined. In response to the closure of the Strait, officials across Asia are asking citizens to take action shorter showers o di work from home to save energy.

In China, the ‘People’s Daily’, the main newspaper of the ruling Communist Party, is instead repeating to its readers that the Dragon has its own “energy rice bowl”. Reuters explains it, citing an editorial of the newspaper which, while not mentioning the ban imposed by Beijing on fuel exports to preserve supplies, highlights that the country is still more protected than many of its neighbors thanks to years of political measures that have reduced its vulnerability to energy shocks.

Electric vehicles and energy independence

China boasts a fleet of electric vehicles as large as that of the rest of the world put together, huge and growing oil reservesa diversification of oil and gas sources and a almost completely independent electricity grid from imports thanks to domestically produced coal and renewable energy.

“The current situation is very similar to what Chinese planners had in mind for decades,” said Lauri Myllyvirta, co-founder of the Clean Air and Energy Research Center in Finland. “This confirms the validity of the commitment to reduce dependence on fossil fuels transported by sea.”

In late 2020, Beijing set a goal of reaching 20% ​​of new EV registrations by 2025. Last year, sales reached half of all new vehicles. This unexpected boom in electric vehicles means that fuel consumption in China has peaked after decades of breakneck growth.

The country is consuming and importing less oil than expected just a few years ago. Oil consumption replaced by electric vehicles last year was roughly equivalent to that of Chinese imports from Saudi Arabia, the Center for Energy and Clean Air Research estimates. Furthermore, China’s electricity grid is powered almost entirely by coal and rapidly growing renewable energy.

The boom in renewable energy

The boom of energy pulitewhich has exceeded the targets set by Beijing, is such that almost all of the economy’s additional energy needs each year are met by new solar or wind plants. This translates into lower imports of coal and liquefied natural gas (LNG) in the few coastal provinces where the latter is present in the energy mix.

Diversification and strategic reserves

This does not mean that China is not independent from oil exports, but it means that, unlike other major Asian importers, it is careful not to depend on a single supplier.

Take Japan: Tokyo normally buys almost 80% of its oil from Saudi Arabia and the United Arab Emirates. China has bought the same share of oil from eight countries, including large quantities of discounted oil from Russia, Venezuela and Iran, countries that US sanctions make inaccessible to most buyers.

China also channels some of these imports into the storage tanks of its secret strategic oil reserve. No one knows exactly how much these reserves amount to, but combined with supplies held by commercial refineries, China has enough oil reserves to replace imports through the Strait of Hormuz for about seven months, according to some estimates.

To give an example, the strategic oil reserves of the United States (Strategic Petroleum Reserve) are sufficient to cover approximately 4 months (or approximately 125 days) of net imports of crude oil, while Italy’s emergency oil reserves, in compliance with the directives of the European Union and the International Energy Agency (IEA), amount to approximately 90 days of net imports or 61 days of internal consumption and correspond to approximately 2-3 months of autonomy in the event of a total interruption of supplies, to guarantee national energy security. Furthermore, last year China produced 4.3 million barrels of oil per day, a new record equal to about 40% of all oil imports.

However, oil reserves are running out and China is unlikely to be able to replicate the US shale oil boom. Gas, however, is another story. Domestic production is growing so rapidly that, combined with pipeline gas, China is actually importing less LNG than in 2020.

China’s gas pipeline network allows the country to diversify its supply sources, reducing dependence on sea imports and being able to source oil and gas from Russia, Central Asia and Myanmar. Ambitious plans have been proposed for another Russian-Chinese gas pipeline, the Power of Siberia 2, but its construction will still take years.