Middle East Conflict Escalates: How Will China, the World's Largest Oil and Gas Importer, Weather the Storm? Experts from "Big Three Oil" Think Tanks Share Their Views

Why Do Asian Importing Countries Bear the Heaviest War Premiums?

After the U.S. and Israel launched military strikes on Iran, the Strait of Hormuz has effectively been under blockade for over two weeks. Over the past ten days, global energy markets have experienced intense volatility, triggering a series of chain reactions that impact the world economy. More critically, as the conflict continues, both the U.S. and Iran have issued strong statements regarding the Strait of Hormuz, an oil and gas “artery,” with no end in sight to its disruption.

China is the world’s largest importer of oil and natural gas (including pipeline gas and liquefied natural gas). By 2025, China’s dependence on foreign oil will reach 72.7%, and natural gas dependence will be 40%. Amid the global energy storm, how will China, a major buyer of Middle Eastern oil and gas, respond to market shocks and mitigate import risks? At the Bloomberg New Energy Finance (BNEF) Beijing Summit on March 12, senior experts from the think tanks of China National Petroleum Corporation (CNPC), Sinopec, and China National Offshore Oil Corporation (CNOOC) analyzed the situation.

According to 2025 projections, one-fifth of global seaborne crude oil passes through the Strait of Hormuz, with China accounting for nearly 45% of its oil imports via this route. “By 2025, approximately 4.9 million barrels of crude oil will enter China daily through the Strait of Hormuz,” said Guo Shengwei, Deputy Director of the Energy Economics Research Institute at China National Offshore Oil Corporation. “Iran is controlling the Strait to counter and weaken the impact of U.S.-Iran military actions. From China’s perspective, the main concern is how this affects our import volumes.”

Guo Shengwei assessed that, currently, domestic refined oil producers have sufficient crude oil inventories to withstand short-term high oil prices, thanks to years of strategic reserves planning. “Compared to some EU countries and Japan/Korea, China has a stronger capacity to endure this round of high oil prices. As the U.S. and Iran reach a stalemate, reopening the Strait quickly is crucial to dispel market panic. From a bottom-line perspective, companies should also prepare for the next 2-4 months with adequate measures.”

“Oil price fluctuations are common, sometimes unpredictable, ranging from negative prices to over $100 per barrel,” said Cao Jianjun, Chief Expert at Sinopec’s Economic and Technical Research Institute. “When uncertainty becomes the norm, we must respond with certainty ourselves.”

Data from the National Energy Administration shows that domestic crude oil production has exceeded 200 million tons for four consecutive years, reaching a record high of 216 million tons in 2025. “Domestic crude oil output continues to grow, and the incremental oil and gas equivalent has exceeded 10 million tons for nine consecutive years. Although dependence on foreign oil remains high, the sustained growth of domestic supply is the foundation for resisting external fluctuations,” he explained.

Cao Jianjun also emphasized the buffering role of China’s domestic energy reserves and large manufacturing systems. “The crude oil industry chain is very long, and there are alternative industries like coal-to-oil. Flexible trade systems, load adjustments, and structural reforms can all help China respond to external shocks.”

From the perspective of national energy security, how should we interpret the blockade of the Strait of Hormuz? “I believe it’s not just about volume and price impacts. Essentially, this is the first time in history that the Strait has been completely blocked and used as a geopolitical bargaining chip. For all countries, especially Asian importers, this situation is very serious,” said Dai Jiaqian, Chief Economist at China National Petroleum Corporation’s Economic and Technical Research Institute. “Asia, as the region most dependent on Middle Eastern oil and gas, bears a heavy war premium. We must be alert: once such a risk occurs for the first time, could it happen again? We cannot rule out that possibility.”

Dai Jiaqian pointed out that rising Middle Eastern oil prices and freight costs could push China’s import cost per barrel above $130 when Brent crude reaches over $90. “From a long-term strategic perspective, this is a major challenge.” He also stressed that increasing domestic oil and gas production is the cornerstone of energy security. Based on assessments, if international oil prices stay at $80 per barrel and domestic investment plans are implemented, China could add about 10 million tons of crude oil production capacity annually from strategic reserves.

“In this incident, China’s strong refining capacity, the world’s largest, ensures a particularly robust supply guarantee, as large inventories are maintained during production and transportation to handle short-term market fluctuations,” Dai Jiaqian said. He recommended that after the Middle East conflict subsides, China should further increase refinery utilization rates and consider relaxing exports of refined oil to enhance the overall resilience of the oil supply chain. In emergencies, export resources can be quickly redirected back domestically.

Jiecheng Energy’s Chief Researcher Yan Jiantao previously told The Paper that Iran exports about 1.8 million barrels of oil per day, mainly to China. The domestic independent refineries heavily rely on discounted Iranian oil, which is significantly affected by this conflict. “If both Venezuelan and Iranian oil supplies are impacted, China should seize the opportunity to accelerate domestic refined oil market reforms, reorganize independent refineries, and boost refinery utilization rates.”

Recently, Lu Riquan, President of China Petroleum Corporation’s Economic and Technical Research Institute, stated at a report hosted by Fudan Development Institute that China, as a major oil and gas importer, has been proactive in strengthening energy security. “We are building a diversified oil and gas import system, sourcing from Latin America, Africa, Central Asia, and Russia, in addition to the Middle East. For example, China imports about 60 to 80 million tons of oil annually from Brazil. Even if Middle Eastern tensions escalate and the Strait of Hormuz is blocked, other import channels can partially compensate. Meanwhile, we are continuously expanding strategic petroleum reserves and domestic oil and gas production. Currently, China produces 210 million tons of crude oil and 260 billion cubic meters of natural gas annually, ranking sixth in the world for oil and fourth for natural gas, providing a solid foundation for energy security.”