{"id":20350,"date":"2026-07-17T07:57:53","date_gmt":"2026-07-17T02:12:53","guid":{"rendered":"https:\/\/eng.dragonmedia.com.np\/?p=20350"},"modified":"2026-07-17T07:57:53","modified_gmt":"2026-07-17T02:12:53","slug":"chinas-energy-security-strategy-amid-the-hormuz-crisis-a-shifting-balance-of-power-in-the-global-oil-market","status":"publish","type":"post","link":"https:\/\/eng.dragonmedia.com.np\/?p=20350","title":{"rendered":"China\u2019s Energy Security Strategy amid the Hormuz Crisis: A Shifting Balance of Power in the Global Oil Market<\/strong>"},"content":{"rendered":"

# Lucky Chand<\/strong><\/p>\n

The severe disruption in the Strait of Hormuz following the Iran war has once again exposed the vulnerability of the global energy system. Against this backdrop, China\u2019s long-term strategy of expanding oil reserves, increasing domestic production, managing imports, adjusting refining capacity and accelerating alternative-energy development has moved to the centre of international debate.<\/p>\n

In an Open Interest column published on July 16, 2026, Reuters examined how China responded to the energy crisis triggered by the Iran conflict. However, the material was not a news report but the personal analytical perspective of Reuters energy columnist Ron Bousso. Reuters also clarified that the views expressed were those of the author and did not represent the institutional position of Reuters News.<\/p>\n

The central argument of the analysis is that China is evolving from being merely the world\u2019s largest crude-oil importer into a power capable of influencing global prices and supplies through its decisions on purchasing, stockpiling, refining and fuel exports.<\/p>\n

After the Iran war began on February 28 and the Strait of Hormuz became effectively disrupted, Brent crude rose from about 72 US dollars per barrel to 118 dollars per barrel by the end of March. Prices moved closer to pre-war levels in early July, but renewed US\u2013Iran attacks again brought volatility to the market.<\/p>\n

As oil prices rose sharply, China did not respond by purchasing large volumes of expensive crude and adding further pressure to the market. Instead, it reduced imports. According to Chinese customs data, China\u2019s crude-oil imports in June 2026 fell by 41.3 percent from the same month a year earlier to 7.12 million barrels per day, the lowest level since October 2016.<\/p>\n

In 2025, China imported an average of 11.55 million barrels of crude oil per day. According to the Reuters analysis, that amount represented around two-thirds of China\u2019s total oil consumption and nearly 16 percent of global demand. This demonstrates the extent to which China\u2019s import decisions can influence the world oil market.<\/p>\n

Under normal circumstances, such a steep fall in imports might be interpreted as a sign of weakening economic activity and demand. In the context of the Hormuz crisis, however, the meaning is different. China appears to have relied on flexibility in its reserves, domestic production and refining capacity rather than competing aggressively for high-priced oil.<\/p>\n

Reuters estimated that more than 13 million barrels per day of Middle Eastern exports had been removed from the market. Under those conditions, China\u2019s reduction in imports helped ease competition for limited available supplies.<\/p>\n

In that sense, China\u2019s decision not only protected its own economy from an extreme price shock but also helped leave some additional oil available for other importing countries.<\/p>\n

China\u2019s ability to manage such a crisis is not the result of an improvised decision. It reflects a combination of long-term stockpiling, state coordination, expanding domestic production, flexible refinery operations and a gradual strategy to reduce dependence on petroleum products.<\/p>\n

According to an assessment released by the US Energy Information Administration on April 20, 2026, China\u2019s crude-oil inventories available for strategic use had reached approximately 1.4 billion barrels by December 2025. The assessment said China added oil to its reserves at an average rate of about 1.1 million barrels per day throughout 2025.<\/p>\n

The definition of this figure, however, requires clarification. China does not regularly publish full official data on its strategic and commercial oil stocks. The EIA estimate is therefore based on import, export, refinery and third-party storage information.<\/p>\n

The EIA included both government-controlled and commercial stocks that could potentially be used for strategic purposes. According to its assessment, around 360 million barrels were under direct government control in December 2025, while approximately one billion barrels were held in commercial storage.<\/p>\n

It would therefore be inaccurate to claim that China possessed a fully government-owned strategic reserve of 1.4 billion barrels. A more precise interpretation is that the EIA estimated China had around 1.4 billion barrels of crude oil when government reserves and commercially held stocks capable of serving a strategic role were combined.<\/p>\n

The Reuters analysis of July 16 estimated that China\u2019s total inventories stood between 1.3 billion and 1.5 billion barrels when the crisis began. That amount was considered sufficient to cover more than 100 days of China\u2019s average crude-oil imports.<\/p>\n

China\u2019s real strength is not limited to the size of its reserves. Its institutional capacity to adjust imports, refining, domestic distribution and exports simultaneously is also an important component of its energy security.<\/p>\n

In March, China suspended exports of refined petroleum products, including petrol, diesel and aviation fuel, to prioritise its domestic market. China had exported approximately 800,000 barrels of refined fuel per day in 2025, equivalent to around 12 percent of Asia\u2019s total refined-fuel imports. As conditions improved, China partially relaxed the export restrictions in July.<\/p>\n

This decision highlights two dimensions of China\u2019s energy strategy. First, during a serious crisis, the government can prioritise the energy requirements of its citizens, industries and domestic economy. This is a natural responsibility of any government seeking to protect national stability.<\/p>\n

Second, the scale of China\u2019s market and refining industry means that its domestic decisions can immediately affect Asian economies dependent on Chinese fuel supplies, including Australia, Bangladesh and the Philippines. China\u2019s efforts to protect its own energy security are legitimate, but they also carry regional responsibilities.<\/p>\n

In June 2026, China\u2019s crude-oil refining volume fell by 18 percent from the same month a year earlier to about 12.5 million barrels per day. This was the lowest refining level since March 2020, when the COVID-19 pandemic was at its peak.<\/p>\n

According to Chinese consultancy OilChem, the utilisation rate of Chinese crude-oil refining units fell to 57.72 percent in June 2026. This was 3.28 percentage points lower than in the previous month and 13.09 percentage points lower than a year earlier.<\/p>\n

These figures indicate that China\u2019s import decline should not be presented entirely as a deliberately planned strategic action. Weak domestic demand, restrictions on refined-fuel exports and reduced refinery operations also contributed to lower crude imports.<\/p>\n

China\u2019s decision to reduce imports as part of crisis management must therefore be considered alongside market demand and conditions in the refining industry. This balanced interpretation provides a more realistic assessment of China\u2019s energy capabilities.<\/p>\n

Alongside drawing on reserves, China has continued to expand domestic crude-oil production. In 2025, domestic production reached an average of approximately 4.3 million barrels per day. This does not meet the country\u2019s entire demand, but it provides an important buffer when international supplies are disrupted.<\/p>\n

China still depends on imports for a large share of its oil requirements. It would therefore be incorrect to conclude that China has become independent of the international oil market or is no longer vulnerable to maritime supply risks.<\/p>\n

However, continued import dependence does not mean helplessness in the face of a supply crisis. China has significantly reduced its vulnerability through diversification of import sources, large reserves, higher domestic production, flexible refinery operations, rapid electric-vehicle adoption and the expansion of renewable energy.<\/p>\n

China\u2019s first national Energy Law, which came into force on January 1, 2025, brought high-quality energy development, national energy security, green transformation and long-term carbon-emission goals under a unified legal framework.<\/p>\n

This shows that China\u2019s energy-security policy is no longer limited to oil stockpiling. It has developed into a multidimensional structure covering fossil fuels, the electricity system, renewable energy, technology, domestic production and national security.<\/p>\n

The rapid expansion of electric vehicles has helped China gradually contain the growth of petroleum demand in the transport sector. Even as economic and transport activity expands, oil consumption no longer needs to rise at the same rate.<\/p>\n

The Reuters columnist argued that China was moving from being a \u201cprice taker\u201d in the global oil market to becoming a power capable of influencing price formation. Although this argument has important foundations, it may be premature to place China in exactly the same category as major oil producers such as OPEC members, Russia or the United States.<\/p>\n

Producer countries can directly change the amount of oil available to the market by increasing or reducing production. China\u2019s primary strength lies instead in adjusting imports, demand, reserves, refining and exports.<\/p>\n

China is therefore better understood not as a conventional price setter acting alone, but as an exceptionally influential manager of demand and absorber of supply shocks. Because of the scale of its market, China can affect global prices and trade flows by changing its purchases by millions of barrels per day.<\/p>\n

The strongest case in support of China\u2019s energy strategy is based on national security. Building reserves, expanding domestic production and developing alternative energy to ensure supplies for a vast population and industrial economy during war, sanctions or maritime disruption is a legitimate and responsible policy.<\/p>\n

The strategy makes China less vulnerable to external pressure. It can also help limit additional global price increases that might otherwise result from aggressive purchasing during a supply crisis.<\/p>\n

At the same time, China\u2019s growing influence increases the importance of transparency and regional coordination. Sudden restrictions on refined-fuel exports can create supply difficulties for partner countries. Adequate advance notice, regional consultation and orderly management of available supplies could make China\u2019s energy leadership more reliable.<\/p>\n

More regular publication of inventory information could also help reduce unnecessary speculation and market volatility. However, withholding complete details of strategic reserves is not unique to China. The global effect of uncertainty is simply greater in China\u2019s case because of the size of its market.<\/p>\n

Conclusion<\/strong><\/p>\n

The Hormuz crisis has presented China not as a vulnerable consumer within the global energy system, but as an influential power capable of managing a major supply shock through a combination of long-term reserves, domestic production, technology, demand management and alternative energy.<\/p>\n

When oil prices rose to extreme levels, China did not engage in aggressive competition for scarce supplies. It reduced imports and refining, relied on reserves and domestic output, and prioritised the protection of its internal market. This demonstrated the importance of coordinated state capacity and long-term energy preparedness.<\/p>\n

China has not achieved complete energy self-sufficiency. Its economy still depends heavily on imported oil. Its successful strategy should therefore be understood not as an attempt to withdraw from the global energy system, but as a policy of managing interdependence during crises while preserving national decision-making capacity.<\/p>\n

The future balance of power in the global oil market will no longer be determined only by how much oil producer countries extract. China\u2019s decisions on how much oil to import, store, refine and export, and how rapidly it shifts transport and industry towards electric and clean energy, will become equally decisive.<\/p>\n

The long-term global significance of China\u2019s energy strategy lies precisely in this changing balance of power.<\/p>\n

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