The Platform

Photo illustration by John Lyman

China is stockpiling massive amounts of oil.

In a world where every move on the geopolitical chessboard reverberates globally, China’s recent acquisition of significant oil reserves has triggered more than a casual glance from international onlookers. While the nation has been quietly and methodically stockpiling cost-effective Russian oil, estimates indicate that by the first half of 2023, China’s daily crude oil production will ramp up by approximately 1.4 million barrels.

The rationale behind stockpiling oil is ostensibly straightforward: nations aim to insulate themselves from energy supply disruptions and market volatility. Oil reserves usually come in two flavors—strategic and commercial. As of February 2021, China’s strategic petroleum reserve approximated 400 million barrels, with an infrastructure that could accommodate about 500 million barrels. Furthermore, Beijing has articulated plans to maintain a reserve of close to 1.27 billion barrels, roughly enough to last 90 days. Increasingly, commercial reserves are controlled by a conglomerate of state-owned and private refineries, which have been in an arms race to expand storage capabilities.

What then, drives China’s frenetic pace in shoring up its oil assets? At first glance, the strategy appears to serve as a bulwark against global oil supply disruptions. Commercial reserves, particularly, function as both a market regulator and a shield against pricing shocks. With 299 oil storage facilities as of August, offering a capacity of approximately 1.32 billion barrels for commercial use, China is looking to extend its total oil reserves—both strategic and commercial—to an estimated 1.63 billion barrels by 2023.

At a time when China is grappling with a decelerating economy, the choice to amass oil reserves underscores not just a commitment to economic resilience but also its clout as a global energy consumer. Yet, this oil-centric strategy seems at odds with Beijing’s public commitments to carbon neutrality by 2060 and a peak in carbon emissions by 2030. It raises questions about how China will juggle its burgeoning oil assets with a pivot to natural gas, nuclear power, and renewable energy sources.

Yet, geopolitics might provide another lens through which to view China’s oil strategy. Moscow and Tehran, finding themselves increasingly isolated by Western sanctions, have become more accommodating oil suppliers. This enables China to not only hoard crucial resources but also to do so at bargain prices. These reserves act as a kind of geopolitical insurance, particularly salient when considering events like the Russia-Ukraine war that could precipitate shocks in the oil market. Furthermore, these reserves could be a critical asset in economic sectors like transportation, manufacturing, and construction, particularly given Sinopec’s projection that China’s jet fuel consumption will soar by 90% in the latter half of the year.

China’s oil calculus becomes even more intriguing when viewed against the backdrop of its simmering tensions with Taiwan—a conflict that, if ignited, would necessitate substantial military resources. In such a scenario, oil would be the lifeblood of China’s war machine, sustaining everything from vehicles to aircraft. Having a robust oil reserve thus could function as a failsafe, assuring an uninterrupted supply line even if international sanctions stymie conventional sources.

China’s oil reserves also offer a tactical advantage over potential adversaries, like the United States or Taiwan, whose energy infrastructure is either less robust or more dependent on foreign suppliers. With substantial stockpiles at hand, China could wield its oil reserves as a diplomatic cudgel or military deterrent, thereby amplifying its strategic influence both regionally and globally.

In sum, while the economic imperatives behind China’s oil stockpiling may appear unambiguous, they dovetail with a geopolitical subtext that cannot be ignored. Whether viewed as a calculated risk or a shrewd investment, China’s decision to amass oil reserves is a multifaceted strategy, deeply enmeshed in both economic realism and geopolitical maneuvering. The reserves are as much about securing the present as they are about fortifying against an uncertain, combustible future.

Aishwarya Sanjukta Roy Proma is a Research Associate at the BRAC Institute of Governance and Development (BIGD). She is a research analyst in security studies. She holds undergraduate and graduate degrees in International Relations from the University of Dhaka, Bangladesh.