Why China can withstand oil’s surge past $100 more easily than other

BEIJING — Surging oil prices following the Iran war are expected to impact China less than in past years as the country has built large crude stockpiles and diversified its energy sources, including renewables.

As oil prices climbed past $100 a barrel for the first time in four years, OCBC analysts said China may be “less sensitive to a prolonged closure of the Strait of Hormuz than many of its Asian peers.”

“China has accumulated one of the world’s largest strategic and commercial crude reserves,” the analysts said, adding that its “rapid transition toward electric vehicles and renewable energy provides an additional structural hedge.”

China held an estimated 1.2 billion barrels of onshore crude stockpiles as of January.

That’s about 3 to 4 months of reserves, which will delay the economic impact, Rush Doshi, director of the China Strategy Initiative at the Council on Foreign Relations, said Monday on CNBC’s “Squawk Box Asia.”

“China has taken the last 20 years to reduce some of its dependence on maritime oil flows,” Doshi said, noting that new overland oil pipelines and some diversification to renewables mean the country now only relies on the Strait of Hormuz for about 40% to 50% of its seaborne oil imports.

By 2030, China aims to increase the share of non-fossil fuels in total energy consumption to 25%, up from 21.7% in 2025.

The strait connects the Persian Gulf to the Arabian Sea and global shipping routes. It’s a narrow passage with Iran to the north and Oman and the United Arab Emirates to the south. About 31% of the world’s seaborne oil flows passed through the Strait of Hormuz last year, or around 13 million barrels a day of crude, according to Kpler.

However, oil shipments through the strait account for only 6.6% of China’s overall energy consumption, according to Nomura’s chief China economist Ting Lu.

Natural gas imports through the route account for another 0.6%, he said.

The shift reflects two decades of strategic transition, giving China a unique position in global energy markets.

The U.S. is the world’s largest consumer of oil, followed by China and India, according to the Organization of the Petroleum Exporting Countries (OPEC), which was founded in 1960 to coordinate global oil supply.

But China is the largest crude importer, buying nearly twice as much as the U.S., while India ranks third, OPEC data showed.

Of the three, India is the most dependent on petroleum imports, accounting for one-fourth of its total consumption, according to CNBC’s analysis of U.S. Energy Information Administration data for 2023.

China was lower at 14%, while the U.S. produced most of its petroleum needs, according to the 2023 data, which includes “other liquids” in the petroleum category.

While the U.S. has ramped up domestic oil production over the past decade, China has rapidly…