China Uses Oil Stockpiles to Exert Geopolitical Power

The Government of China has transformed its historical vulnerability to oil supply shocks into a tool of geopolitical power following a war with Iran. By stockpiling oil reserves that represent roughly a third of known worldwide inventories and expanding refining capacity, Beijing shifted from a dependent importer to a dominant energy actor.

During the first six months of the conflict, China slashed oil imports by 23 percent, preventing crude prices from rising as sharply as analysts predicted after Iran restricted shipping in the Strait of Hormuz. Beijing further exerted influence by restricting exports of refined fuels, including gasoline, diesel, and jet fuel, to punish countries at odds with its foreign policy, specifically Australia and the Philippines, while prioritizing allies such as Vietnam and Thailand.

This shift is supported by a decline in domestic oil demand driven by a robust high-speed rail system and the adoption of electric vehicles. Sinopec Maoming Petrochemical Company reported that domestic oil consumption likely peaked last year. This newfound energy independence challenges the traditional dominance of oil producers like the United States and Saudi Arabia and may reduce the deterrent effect of foreign oil restrictions on China's strategic decisions regarding Taiwan.