A record 14 percent surge in oil prices on September 16 – following drone attacks on Saudi Arabian oil refineries – served to underscore China’s reliance on imported energy, and the importance of its plan to diversify its energy sources.
The missile attacks of October 11 on an Iranian oil tanker that caused a 2.4 percent jump in oil prices – the sharpest since the Gulf War in 1990 – and the prospect of broader unrest throughout the Middle East now that Turkey has moved forces into Kurdish areas of Syria, are only likely to heighten China’s unease, analysts say.
“The increase in oil prices will clearly raise the cost of imported crude supply for Chinese refineries, possibly followed by dislocating effects further down the value chain, like the transportation sector, heating sector and consumer goods that use oil as a feedstock,” Julian Inchauspe and Roberto Aguilera, energy economists at Curtin University in Perth, Australia told Al Jazeera.
“In some cases, it will be possible to substitute to other fuels like natural gas and coal, which will boost prices of those commodities,” they said in a joint response.
After the surge in prices following the attacks on Saudi Arabia, prices fell almost as quickly once the government signalled oil production would be back online in a matter of weeks. And despite further falls in recent days, Brent crude oil prices are still nearly 10 percent higher than they were at the start of 2019.
On Friday, China’s Premier Li Keqiang held a special meeting with top energy officials stressing the need to maintain energy security amid rising global tensions and the country’s supply challenges.
Li said China needed to further tap its own coal resources, boost domestic gas and oil exploration, and push for more hydropower, wind and solar energy to diversify its energy sources.
Here comes the sun
All of those options come with pros and cons. But in the long term, analysts say, China appears to have little choice but to give renewables a major boost.
While domestically produced coal gives China a valuable energy security buffer, over-reliance on it has in recent years resulted in choking smog in some of its biggest cities. Oil and gas, whether imported or domestically sourced, also contribute to pollution.
Meanwhile, imported oil and gas, as witnessed by recent events, expose China to overseas developments over which Beijing has little control.
Nuclear power generates large amounts of toxic waste that can take hundreds of years to degrade, while hydroelectric projects displace entire communities and ecosystems.
Oil giant BP said China accounted for 24 percent of the world’s energy consumption last year, the biggest share of any country.
As of 2017, most of that energy, around 60 percent, came from coal. Oil contributed another 19 percent, and gas another seven percent. Renewables accounted for around three percent, according to BP.
That picture is set to change.
China is stepping up its push into renewable energy [File: Qilai Shen/Bloomberg]
BP’s projections show renewables rising in importance, supplying 18 percent of China’s energy by 2040, the same proportion as oil by then. The proportion of gas will likely double from seven percent in 2017 to 14 percent by 2040. Meanwhile, coal’s share will fall to 35 percent.
While the Middle Kingdom has been a leader in installing solar and wind power in recent years, new policies removing subsidies for renewable projects have started to slow the implementation of such projects.
Even with all the recent installations, wind and solar only accounted for 5.2 percent and 2.5 percent respectively of China’s national power generation in 2018, according to data from the China National Energy Administration. So there is substantial room for growth in renewable energy, analysts say.
“Globally, everyone is looking at higher oil prices and a higher energy bill,” James Dorsey, a senior fellow at the S Rajaratnam School of International Studies in Singapore, told Al Jazeera. “To what degree that propels China to look at other alternatives, more renewables, more gas, theoretically this could be an incentive.”