The Third Gulf War is here, and the global oil market is staring into the abyss. The blockade of the Strait of Hormuz has triggered an unprecedented logistical panic, propelling the price of Brent crude oil above $100 per barrel. The aftermath is stark across Asia: the Philippines has cut working hours, Singapore is resorting to telework, and Thailand is desperately intervening in diesel prices.
In stark contrast, China watches the chaos unfold with a sense of composed detachment. This isn’t a matter of luck; it is the result of meticulous strategic planning over the past decade. Just as China historically fortified its borders against nomadic invasions, it has been constructing an invisible Great Wall against fossil fuel volatility.
The Energy Strategy: A Long-term Vision
China’s energy resilience began to take shape five years ago. In 2021, President Xi Jinping emphasized that the “energy rice bowl” must be firmly in China’s own hands. This metaphor, historically used to emphasize food security, has now been applied to energy—a revelation of the state’s acute awareness of its vulnerabilities.
Is Patience a Virtue?
The wisdom of waiting has proven fruitful for China, as the country leverages its long-term strategy under the “Made in China 2025” initiative. The Chinese government recognized that its reliance on foreign oil and gas posed the greatest military and economic threat. Thus, mass electrification became critical not merely for environmental reasons but for national survival. As of today, over a quarter of China’s electricity is generated from renewable sources like solar and wind, fundamentally reshaping the global energy landscape.
China’s Energy Shield in Action
This extensive preparation has equipped China to deploy immediate containment measures in light of the ongoing Gulf conflict:
- Closing Energy Borders: The Chinese National Development and Reform Commission ordered state-owned companies to suspend gasoline and diesel exports to safeguard domestic supply.
- The “Shadow Fleet”: Despite the blockade, Iran continues to export approximately 2.1 million barrels per day using unmonitored tankers outside the US financial system.
- Land Alternatives: China is maximizing the use of land pipelines connecting it to Russia and Kazakhstan, effectively bypassing the vulnerable Strait of Hormuz.
- Renewable Energy Expansion: In July 2024, China reached its ambitious goal of 1,200 GW of wind and solar capacity six years ahead of schedule. By the end of 2025, new energy vehicles accounted for over 60% of car sales.
- Building Infrastructure: To mitigate renewable energy intermittency, battery storage capacity was increased by 75% by 2025.
Challenges and Dependencies
Nevertheless, cracks in China’s energy strategy remain. A considerable reliance on coal persists, accounting for 56% of the country’s primary energy needs as of 2024. Over 300 coal plants are under construction, highlighting the country’s dependency on this fossil fuel.
Moreover, the struggle for technological independence is ongoing. Although China produced 484 billion chips in 2024, it still lacks access to advanced EUV lithography machines from ASML, a crucial component in chip production. Nonetheless, Chinese companies like SMIC are finding innovative ways to produce advanced chips, revealing cracks in the Western blockade.
The Evolving Geopolitical Landscape
The current Middle Eastern crisis underscores a significant geopolitical irony. While Western nations scramble to secure oil supplies reminiscent of past crises, China has quietly won the energy war of the 21st century. The closure of the Strait of Hormuz not only tightens the grip on oil but also impacts the critical LNG supplies vital for Taiwan and its semiconductor industry.
Just as the 1973 Arab oil embargo catalyzed a shift toward fuel-efficient vehicles, today’s crisis may herald the ascendancy of electric vehicles, marking a notable shift in power dynamics. The era of petrostates, fraught with vulnerabilities, is giving way to China, the first “electrostate” of our time. This transition reveals that what was once seen as the paranoia of an autocrat may indeed be prudent foresight. China’s “energy rice bowl” is now more robust than ever, ready to face whatever challenges lie ahead.