After the closure of the Strait of Hormuz, what is China's plan to confront the oil crisis?
China is waging a quiet but complex battle to secure its energy needs, between its huge reserves and unconventional alternatives.
strategic tools
Estimates, including those reported by The Economist, indicate that about half of China’s oil imports pass through the Strait of Hormuz, making any disruption to this vital artery a direct threat to its energy security.
Although Beijing is a major oil producer, its huge consumption – which exceeds the combined consumption of major countries – makes it heavily dependent on external supplies, which increases its vulnerability to geopolitical shocks.
In contrast, Beijing is not standing idly by, as it is relying on a range of strategic tools to mitigate the impact of the crisis.
“tea-pot"
Teapot refineries are independent refineries that import oil, especially from Iran, at discounted prices, and deals are often made in yuan instead of dollars, allowing them to circumvent Western sanctions.
Estimates suggest that around 1.4 million barrels per day flow through these channels.
China has a strategic oil reserve sufficient for about 120 days, giving it room to maneuver in case of supply disruptions.
proactive steps
As a proactive step, Beijing is moving to reduce or halt fuel exports, with the aim of maintaining domestic market stability and avoiding price hikes locally.
Despite these tools, China faces increasing pressures, most notably rising shipping and marine insurance costs, disruption to global supply chains, and escalating competition for resources with major economies.
Furthermore, any prolonged escalation could push prices to levels that put pressure on economic growth, not only in China, but globally.
