Oil price plunge likely to spur China’s quest for energy diversification, despite short term gain, analysts say

Oil prices have plunged over the past week due to the Saudi-Russia price war, a boon to China because it imports 70 per cent of its oil

But the fall could hurt Chinese oil companies and is unlikely to affect Beijing’s long term focus on energy diversification, analysts say

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An engineer checks pipelines at an oil refinery of China National Petroleum Corp (CNPC) in Lanzhou, Gansu province. Photo: Reuters

Published: 6:30am, 13 Mar 2020Updated: 6:30am, 13 Mar 2020

A sharp plunge in crude oil prices triggered by a price war between Saudi Arabia and Russia is likely to serve as a wake up call for China.

In the wake of the crash, analysts say the world’s biggest importer of oil will bolster domestic production of both fossil fuels and alternative power sources to address growing energy security concerns and protect its own industries.

In the short-term, lower oil prices make renewable energy sources like solar and wind less competitive, increasing incentives to use traditional energy sources like oil and coal.

But Beijing values long-term energy security over short term gains from lower prices, officials have stressed, meaning it is likely to continue diversifying its energy base.

“On the one hand, the decline in China’s import costs is beneficial” for the economy, said Wang Yongzhong, who leads global energy research at the Chinese Academy of Social Sciences, a key governmental think tank based in Beijing.