Ukraine crisis seen as wake-up call for China’s energy security, Beijing ‘unlikely’ to release oil reserves

Rising oil prices as a result of the Russia-Ukraine conflict represent a wake-up call for China’s energy security, experts have warned, stressing the importance of greater self-reliance for the world’s largest crude importer. Beijing has yet to offer a clear signal if it will release supplies from its strategic oil reserves in sync with the United States and other economies. But analysts have said that China’s stockpile is not large enough and warned about the risk of commodity inflation. The benchmark Brent crude oil price topped US$100 per barrel for the first time since September 2014 on Thursday after Russia launched attacks on Ukraine. China’s current reserves are not particularly sufficient, so it is unlikely to take such action for coping with short-term [volatility] Lin Boqiang US President Joe Biden responded to the surge by saying that Washington was working with other countries on a coordinated release from global strategic oil reserves. Japan and Australia have said they are ready to tap their reserves if global supplies were hit by hostilities in Ukraine. “China’s current reserves are not particularly sufficient, so it is unlikely to take such action for coping with short-term [volatility],” said Lin Boqiang, dean of the China Institute for Studies in Energy Policy at Xiamen University, who is also a member of the expert consultation committee under the National Energy Commission. The US currently holds around 600 million barrels in reserve, which is enough oil to meet demand for more than a month. How much crude oil is China sitting on, and can it help cool soaring prices? China does not regularly publish the size of its crude reserves, but the National Bureau of Statistics said in 2017 that the national reserve, including some corporate stocks, totalled 37.73 million tonnes, or 280.7 million barrels, by mid-2017. Wang Yongzhong, a senior energy researcher with the Chinese Academy of Social Sciences, has estimated that China’s crude reserve is equivalent to around 40-50 days. Lin’s comments were echoed by Lu Xiang, a senior fellow with the Chinese Academy of Social Sciences, who said that China does not have sufficient crude oil reserves. I don’t think China has the kind of reserves and resources to actually impact the price of oil Bala Ramasamy China said in November that it would join coordinated global efforts to release oil reserves based on its own needs, but Lu said that the move could have been symbolic. “I don’t think China has the kind of reserves and resources to actually impact the price of oil,” said Bala Ramasamy, a professor of economics at the China-Europe International Business School. China has so far been walking a fine line between Russia and the West over the Ukraine crisis, and has neither endorsed nor condemned Moscow’s moves. On Thursday, foreign ministry spokeswoman Hua Chunying said that “truly responsible countries should take responsible actions to jointly safeguard global energy security”. China does not have many tools to deal with short-term fluctuations in oil prices, according to Lin, but he argued that the pressure of inflation caused by the soaring oil prices was controllable in China, since it only contributes to around 20 per cent of the country’s overall energy consumption. “Supporting reconciliation [between Russia and Ukraine] as much as possible is a geopolitical approach … but there are few other means, what can you do if you cannot release the oil reserve,” he said. Lin called on China to focus on boosting its domestic energy output to fortify its own ability to resist long term external risks. “Geopolitical [crisis’] always comes abruptly and gives you a lesson every time … that it is very likely there will be a sudden interruption, anything may happen, since China is heavily dependent on foreign supplies, we need to do our best to be well prepared in the future,” he said. The black swan incident [in Ukraine] has made the global challenge of inflation even worse Xu Hongcai China’s crude imports fell by 5.3 per cent in 2021, while its reliance on overseas oil fell by 1.6 percentage points to 72 per cent, representing the first time both figures had fallen since 2001. China made its first sale from its strategic oil reserves in September, having auctioned 4.43 million barrels, according to the state-backed China News Service. Xu Hongcai, deputy director of the economic policy commission under the China Association of Policy Science, said China can refer to the tacit understanding with the US last year to join the release of oil reserves. “The black swan incident [in Ukraine] has made the global challenge of inflation even worse,” he said.