China possesses an electric vehicle fleet roughly the size of the rest of the world combined, has large and growing oil reserves, diversified sources of oil and gas, and an electricity grid that relies almost entirely on domestic coal and renewable energy.
Energy expert Lauri Myllyvirta, co-founder of the Centre for Research on Energy and Clean Air in Finland, notes that "the current situation is indeed close to what Chinese planners had in mind for decades" and that "it confirms the effort to reduce reliance on fossil fuels transported by sea."
The unexpected boom in the electric vehicle market has further transformed China's energy landscape. At the end of 2020, Beijing set a target for electric vehicles to reach 20% of new sales by 2025, but last year their share had already reached half of all new cars.
Such a leap means that China's fuel consumption has peaked after decades of strong growth, so the country is burning and importing less oil than previously forecast.
According to estimates from the Centre for Research on Energy, the amount of oil displaced from consumption by electric vehicles last year is roughly equivalent to China's imports from Saudi Arabia.
China's electricity grid is almost entirely powered by coal and rapidly growing renewable sources, and the explosion of clean energy has even surpassed Beijing's own targets, with almost all additional electricity demand being met by new solar and wind power plants.
This reduces the need for imports of coal and liquefied natural gas, which play a more significant role in China's energy mix only in a few coastal provinces. Although China imports large quantities of oil, unlike other major Asian importers, it takes care not to become dependent on a single supplier.
The example of Japan, which buys nearly 80% of its oil from Saudi Arabia and the United Arab Emirates, contrasts with China's approach, as China has distributed the same share of imports across eight countries, including large volumes of discounted shipments from Russia, Venezuela, and Iran, which are unavailable to most buyers due to U.S. sanctions.
Some of these flows also end up in the storage of China's mysterious strategic petroleum reserve. The exact scale of these reserves is unknown, but together with the stocks of commercial refineries, the country is estimated to have enough oil in storage to replace imports through the Strait of Hormuz for perhaps seven months.
Last year, China produced 4.3 million barrels of oil per day, a new record and about 40% of total imports, although it is warned that domestic oil fields are depleting and it is unlikely that the country will replicate the U.S. shale boom.
The story with gas is completely different. Domestic production is growing fast enough that, combined with pipeline imports, China now imports less liquefied natural gas than in 2020.
The pipeline network allows it to move away from maritime imports and procure oil and gas from Russia, Central Asia, and Myanmar. At the same time, ambitious plans have been introduced for the new Russia-China Power of Siberia 2 gas pipeline, although its completion is still several years away.