China’s Thirst for Oil

From The International Crisis Group:

China’s need for energy is growing faster than any other country’s. Record economic growth results in demand that outstrips domestic supply, leading Beijing to look outward to ensure growth and stability. Concerns about the global market have led state firms to buy stakes around the world, often in countries shunned by Western firms. The investments are an important factor in Beijing’s foreign policy. They also drive concerns that China’s actions fuel or exacerbate conflict in the developing world and cause tensions with other major -importing countries as it locks up energy resources. China’s energy needs have led it to play a more prominent role in international markets in recent years. This has generated concerns about the potential impact on other countries’ energy security, and global and regional security generally. These are largely overstated, but China could take a number of steps, as its policymaking and implementation evolves, which would help create a more cooperative international environment on both energy and wider security issues.

Chinese companies cannot dominate international oil supplies. They are small players outside of China, and the oil they bring online expands global supply, benefiting all consumers. The majority of oil they produce is sold on the open market, not shipped back to China. Furthermore, Beijing’s idea of energy security is showing signs of evolving from a mercantilist approach based on distrust of international markets, and therefore a desire for physical control of oil supplies, to a more open approach favouring international energy markets and cooperation. Chinese leaders are coming to understand that their state companies’ investments abroad have contributed far more to those companies’ profits than to improving the country’s energy security.

See also a backgrounder from the Council on Foreign Relations on China, Africa, and Oil.

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