China consuming oil reserves to avoid import
- 2 days ago
- 2 min read
By The Slate Bureau
New Delhi, June 15: The ongoing war in West Asia and the resultant disruption in global oil supply has created a major crisis in several countries around the world.
However, it has also thrown into sharp focus the manner in which China has managed avoid the worst of the crisis thanks to long term planning, which includes stockpiling petroleum supplies over last several years and a major shift towards electric vehicles.
These measures have helped China to reduce its oil imports to 7.7 million barrels a day from 11 million. As a result, China has been able to avoid paying the higher prices of oil while emerging as an unexpected stabilising force for the global economy.
Global oil prices are currently at around $90 per barrel, down from the $126.41 it had hit when petroleum supplies through the Strait of Hormuz took a big hit due to the war.
At a time when global fuel oil prices have skyrocketed due to the conflict involving Iran, China is tackling the crisis through several well-considered strategies. Instead of purchasing oil at high prices, the country is utilizing its existing reserves. Alongside this, it has scaled back refinery operations and is emphasizing the use of public transport over private vehicles.
The decision by Chinese government of investing in electric vehicles and high-speed rail over the last few years has also started paying rich dividends by helping to reduce the country's demand for oil. In recent years, Chinese consumers have been shifting away from gasoline-powered cars toward EVs and opting for high-speed trains instead of short domestic flights.
However, the good times may not last much longer for China. The country’s stocks of ethylene and other petrochemical feedstocks are running low. Even if China decides to accelerate inventory drawdowns to more than one million barrels a day, its commercial reserves would still cover about six months of demand.
