Why China Is Relaxed As Oil Prices Surge: Three Strategic Weapons Revealed
Jakarta, CNBC Indonesia—Geopolitical tensions involving Iran are increasing the risk of disruptions to the Strait of Hormuz, one of the world’s most important oil distribution routes. However, China stands as an exception.
These escalating tensions have driven global oil prices higher, even breaching the psychological level of US$100 per barrel. This condition threatens the economies of energy-importing nations.
Unlike most other countries, several analysts assess that China is potentially more resilient to oil price spikes compared to other Asian nations.
Several factors are believed to make China’s economy better prepared to withstand potential global oil price shocks.
- Large Strategic Oil Reserves
One of the primary factors making China more resilient to oil price volatility is the size of its strategic oil reserves.
In recent years, the Chinese government has aggressively built up its Strategic Petroleum Reserve (SPR) as a precautionary measure against global energy supply disruptions.
These reserves act as a buffer in the event of price spikes or disruptions to global oil distribution, allowing China flexibility to withstand supply pressure in the short term without immediately increasing imports amid high prices.
China has accumulated one of the world’s largest strategic and commercial crude oil reserves, estimated at approximately 1.2 billion barrels of crude oil on mainland territory as of January 2025.
This amount is equivalent to approximately 3 to 4 months of reserves, which can delay the economic impact if supply disruptions occur.
“Over the past 20 years, China has sought to reduce its dependence on maritime oil delivery routes,” said Rush Doshi, director of the China Strategy Initiative at the Council on Foreign Relations, quoted from CNBC International.
He added that the development of new onshore oil pipelines and diversification towards renewable energy now means China relies on the Strait of Hormuz for only approximately 40% to 50% of its seaborne oil imports.
The Strait of Hormuz itself connects the Persian Gulf with the Arabian Sea and global shipping lanes. This narrow strait has Iran to its north and Oman and the United Arab Emirates to its south.
Approximately 31% of global seaborne oil flows passed through the Strait of Hormuz last year, or about 13 million barrels per day.
However, oil shipments through this strait account for only about 6.6% of China’s total energy consumption, according to Ting Lu, chief economist for China at Nomura.
Meanwhile, natural gas imports through this route contribute only about 0.6% of China’s energy consumption.
This shift reflects two decades of strategic transformation in China’s energy system, positioning the country uniquely in the global energy market.
- Energy Transition Reduces Oil Dependence
Another factor strengthening China’s position is the accelerating energy transition underway in the country.
By 2030, China targets non-fossil energy to account for 25% of total energy consumption, up from 21.7% in 2025.
China is currently among the countries with the largest investments in the renewable energy sector, ranging from solar and wind to nuclear power. Additionally, the penetration of electric vehicles (EVs) in China is also developing very rapidly.
As a result, China’s oil consumption growth is not as rapid as before. This makes China’s economy relatively more resilient to global oil price shocks because the country is not overly dependent on fossil fuels.
Whilst the United States has increased domestic oil production over the past decade, China has rapidly diversified its energy sources.
Renewable energy—excluding nuclear and hydroelectric power—contributed approximately 1.2% of China’s total energy consumption in 2023, up from just 0.2% two decades earlier, according to CNBC calculations based on International Energy Agency (IEA) data.
By comparison, India and the United States recorded far lower shares of renewable energy in 2023, at approximately 0.2% each.
These figures are still modest for now. However, the increasing share of renewable energy in China’s energy mix has global implications.
China’s major push towards electric vehicles (EVs), particularly for trucks, has displaced oil demand by more than 1 million barrels per day, according to a Rhodium Group report from July 2025.
The research firm estimates this figure will increase by approximately 600,000 barrels per day over the next 12 months.
Currently, more than half of new passenger vehicles sold in China are new energy vehicles (NEVs), which rely more on batteries than petrol.
“With transportation fuel demand already showing signs of peaking and renewable energy capacity expanding rapidly, China’s sensitivity to oil price fluctuations continues to decline year on year,” wrote OCBC analysts.
The strengthening of transport electrification and expansion of renewable energy-based power generation in the long term will increasingly protect the economy from oil-related shocks.
Oil and natural gas currently contribute only about 4% of China’s power generation mix, far lower than the 40% to 50% commonly seen in many other Asian nations.
Renewable energy accounted for approximately 80% of China’s new electricity demand additions in 2024.
Conversely, electricity—which is predominantly generated from coal and increasingly from renewable energy—now accounts for an ever-increasing share of China’s total energy consumption, according to energy research organisation Ember.