China Set to Become Largest Net Oil Importer

The U.S. Energy Information Administration predicts that China is likely to become the world’s largest net oil importer as soon as October:

The imminent emergence of China as the world’s largest net oil importer has been driven by steady growth in Chinese demand, increased oil production in the United States, and a flat level of demand for oil in the U.S. market.

[…] Looking beyond 2014, higher U.S. oil production and stagnant or declining U.S. oil consumption, coupled with China’s projected strong oil demand growth and slow oil production growth, suggest that once China replaces the United States as the world’s largest net oil importer, the gap between net oil imports in China and the United States will grow.

Analyst Amrita Sen told the BBC that the U.S. remains by some distance the largest importer overall, but that its diesel and petroleum exports offset this on a net basis. Even so, she added, “because of the growth in China and in India, everybody’s diverting their attention … which does mean that if for whatever reason shale doesn’t work out, much like Europe which is really facing a dearth of crude supplies, America might be in a similar situation where because everybody’s now focused towards giving fuel to Asia, there isn’t that many exporters coming into the U.S..”

Global Times’ Liang Fei also described the implications of the shift:

China now imports around 60 percent of its oil consumption, but the US reliance on foreign oil is declining – less than 50 percent at present according to media reports, as its domestic production of shale oil, tight oil and other alternative energy such as shale gas is increasing.

“It is only a matter of time for China to surpass the US in net oil imports. The most important thing is to find solutions because as the largest oil importer China will be very vulnerable to oil price changes,” said Lin Boqiang, director of the China Center for Energy Economics Research at Xiamen University.

The US has played an important role in stabilizing global oil prices and also maintaining order in major oil producing countries. However, the US will be less motivated to do so with less reliance on imported oil, experts said.

Lin noted that at present China is still not capable of playing such a major role and the only thing it can do now is to save energy as well as diversify oil sources to guarantee energy security. [Source]

A new State Council guideline issued at the start of the month emphasized the importance of energy savings, though with an ostensible focus more on environmental protection. In terms of diversification, Lin identifies Russia as a promising source. An oil pipeline across Myanmar from the Indian Ocean will also help once is complete; a parallel line carrying natural gas went into operation late last month. At present, most of China’s oil imports pass by tanker from the Indian Ocean through the narrow Malacca Strait, a fact lost on neither China nor its potential adversaries. At The Diplomat, Shashank Joshi suggests that at least from India’s perspective, a blockade of the Strait would be impractical due to the difficulty of singling out China-bound vessels and the protection offered by China’s strategic reserves.