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

BEIJING — The rise in oil prices in the wake of the Iran war is expected to affect China less than in past years, as the country builds up large crude oil reserves and diversifies its energy sources, including renewables.

As well as oil prices It exceeded $100 per 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 counterparts.”

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

China held It is estimated at about 1.2 billion barrels Onshore crude stocks as of January.

That means about 3 to 4 months of reserves, which will delay the economic impact, Rash Doshi, director of the China Strategy Initiative at the Council on Foreign Relations, told CNBC on Monday.Squawk Asia Fund“.

“It has taken China the last 20 years to reduce some of its dependence on offshore oil flows,” Doshi said, noting that the new Onshore oil pipelines Some diversification into renewable energy sources means that the country now relies only 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%, compared to 21.7% in 2025.

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

However, oil shipments across the Strait account for only 6.6% of China’s total energy consumption, according to Nomura Bank’s chief China economist, Ting Lu.

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

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

The United States is The largest oil consumer in the worldFollowed by China and India, according to the Organization of the Petroleum Exporting Countries (OPEC), which was established in 1960 to coordinate global oil supplies.

but China is the largest importer of crude oilOPEC data showed that India buys nearly twice as much as the United States, while India ranks third.

Of the three countries, India is the most dependent on oil imports, accounting for a quarter of its total consumption, according to a CNBC analysis. US Energy Information Administration data For the year 2023.

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

While the United States has Boosted domestic oil production Over the past decade, China has rapidly diversified its energy sources.

Renewables, excluding nuclear and hydropower, accounted for 1.2% of China’s total energy consumption in 2023, up from 0.2% two decades ago, according to CNBC calculations based on International Energy Agency data.

India and the United States recorded a much lower share of renewables in 2023, at 0.2% each.

This is a small number at the moment. But the growing share of renewables in China’s energy mix has global implications.

The push for electric vehicles has already begun in China, especially in trucks Displacement of more than 1 million barrels per day from implied oil demandRhodium Group said in July 2025.

The research company expected this number to rise by about 600,000 barrels per day over the next 12 months.

More than half of new passenger cars sold in China are now new energy vehicles, meaning they rely more on batteries than gasoline.

With road fuel demand already showing signs of peaking and renewable energy expanding rapidly, China’s sensitivity to oil price fluctuations is declining year on year. [year-on-year] OCBC analysts said.

Over time, the electrification of transportation and the expansion of renewable energy generation will further insulate the economy from oil-related shocks.

Analysts said oil and natural gas account for only 4% of China’s energy mix, far lower than the 40% to 50% share in many Asian economies.

Electricity, which is generated largely from coal and an increasing amount from renewables, now accounts for 1 Increasing share of China’s total energy consumption, according to the Ember Energy Research Center.

Renewable energy It provides about 80% of the new demand for electrical energy in China In 2024, Ember said.

But coal remains an important, albeit stagnant, energy source in the country. China was the largest in the world Producer and consumer of coal In 2023, despite efforts to reduce carbon emissions.

US sanctions on Iran have also made China one of the few buyers of Tehran’s oil.

Iran accounts for about 20% of China’s oil imports, although most of that volume can mostly be replaced by increased oil imports from Russia, said Anu Kohanathan, head of corporate research at Allianz Trade.

Kohanathan said the greatest risk lies in the nearly 5 million barrels per day of oil that China imports from other Middle Eastern countries through the Strait of Hormuz.

As the Iran war enters its second week, it remains unclear when the conflict will end.

“A shock like this is more likely to reinforce the direction China is already on than to change it,” said Mu Yi Yang, senior Asia energy analyst at Ember.

“It highlights the risks of relying too heavily on imported oil and gas. That’s why the transition isn’t just about building more wind and solar, it’s also about economy-wide decarbonization,” she added.

However, change does not happen easily. The country’s fossil fuel industry is dominated by China’s state-owned enterprises, which tend to be less dynamic than their private sector counterparts.

China may also continue to build crude oil reserves.

The US Energy Information Administration said in February that it expects China To expand strategic stock By about one million barrels per day in 2026.

China’s crude oil imports fell by about 2% in 2024, according to Wind Information. But as tensions in the Middle East began to escalate last year, China’s crude oil imports rose 4.6% to a record high of about 580 million metric tons.

“China is financially vulnerable but more resilient,” said Joe Katayama, principal analyst at Kpler. he previously told CNBC.

— CNBC’s Sam Meredith, Ying Shan Li and Penny Chen contributed to this report.