As the world’s largest energy consumer and producer, China is undeniably important to the ever-evolving global energy landscape. Economic growth and urbanization will only increase its already heavy reliance on energy imports over time, widening the gap between domestic consumption and production. China’s efforts to secure access to oil and gas resources around the world have raised concerns that China could translate its growing trade ties into greater diplomatic influence abroad. For the most part, these fears are overblown; of the many factors that contribute to bilateral diplomatic and security relationships, oil trade is rarely the most important.
China is the largest energy producer in the world. While coal remains the country’s biggest source of energy, the Chinese government has been making an effort to move away from coal and toward cleaner fuels. In 2014, China produced nearly 4.6 million barrels per day of oil and nearly 4.4 trillion cubic feet of gas.1 Because the country’s biggest oil fields have matured and production has peaked, Chinese companies have had to turn to fracking and enhanced oil recovery techniques to boost their yield. In addition, the Chinese government has begun to place more emphasis on developing new fields, including tight oil and deepwater plays. However, territorial disputes in the South and East China seas as well as low oil prices have limited the extent to which China rely on new technologies to boost its domestic production of oil and gas.
Despite its prospects for even greater production, China’s rapid economic growth and urbanization are pushing the country’s demand for energy upward. Chinese consumption reached over 10 million barrels per day of oil and 5.6 trillion cubic feet of gas in 2013,2 figures that are expected to rise by 60 percent by 2035.3 With demand quickly outstripping domestic production, China has been forced to look beyond its own borders for resources. In 2013, Chinese crude oil imports averaged 5.6 million barrels per day — a 4.4 percent increase over the previous year.4 According to the state-owned China National Petroleum Corporation, China is set to increase its crude oil imports by 5.4 percent to reach 6.5 million barrels per day in 2015.5 Because it will continue to rely heavily on oil imports for the foreseeable future, China is actively seeking greater access to global oil supplies.
China is facing a similar trajectory in its natural gas sector. It is already the world’s fifth-largest consumer of natural gas, and its appetite will likely triple over the next two decades.6 China’s natural gas consumption has consistently surpassed domestic supply since 2007, which has forced it to import liquefied natural gas (LNG) and pipelined gas. China has continued to diversify its supply of natural gas imports; in 2014, it imported LNG from 17 different countries, with Qatar as its largest exporter. Most of China’s piped natural gas came from Central Asian countries and Myanmar.7
Many believe China’s growing energy needs have made energy security a bigger concern for Chinese policymakers in recent years. Some worry that China’s efforts to secure its access to global energy supplies could hurt U.S. security interests, whether by sparking a maritime conflict, increasing Chinese influence abroad via investment, or reducing the United States’ own access to oil and gas resources.
Nearly one-third of global crude oil trade and more than half of global LNG trade passes through the South China Sea each year. The shortest shipping route between major African and Persian Gulf suppliers and Asian consumers passes through the Strait of Malacca, a narrow maritime choke point, before reaching the South China Sea.8 People fear that as China becomes increasingly reliant on energy imports to meet domestic consumption demands, it may become more aggressive in the maritime realm in an attempt to protect the vital sea-lanes its imports transit. Since a number of countries bordering the South China Sea dispute China’s maritime claims there, greater aggression on China’s part could ratchet up existing tensions in the region, potentially even igniting a conflict. However, China is taking steps to diversify its oil and gas supply routes by enhancing existing infrastructure across Eurasia and building new overland pipelines; such moves are meant to reduce its dependence on global shipping lanes. Therefore, fears of greater Chinese maritime aggression driven by energy demand may be overblown.
Many also think that China might try to curry favor with the world’s major energy producers by investing heavily in those countries’ economies. Coupled with the United States’ dramatic reduction of oil imports in recent years, people worry that China’s influence in the global oil and gas markets may be rising at the United States’ expense. However, there is little evidence to support these fears; many other factors typically outweigh oil trade in determining the tone and strength of diplomatic and military relationships between countries.
Finally, people worry that China’s efforts to secure large supplies of oil on the global market will hurt U.S. energy security, either by increasing the global price of oil (thus making it more costly for American consumers to purchase), or by restricting the amount of remaining oil available. The first concern, though valid, would have the same effect on China: Because of how the global oil market functions, higher oil prices impact not only American consumers but also Chinese consumers. The second concern, however, is not valid. The global oil market is like any other market: Supply adjusts to changes in demand. If China’s demand for oil increases, that does not mean less will be available for other consumers; instead, producers will boost their output in response to temporarily higher prices, adding to the global supply. If demand were to decrease, producers would likewise respond to lower prices by cutting output.