China’s Oil Security in the Context of Energy Revolution: Changes in Risks and the Hedging Mechanism ()
ABSTRACT
Does China’s energy revolution strengthen or weaken its oil security?
This study analyzes how the energy revolution influences China’s oil security
by exploring the changes in risks and the hedging mechanism. China proposed the
energy revolution in 2014, committed to carbon peak by 2030 and carbon neutrality
by 2060, aiming to accelerate its energy transition. Meanwhile, China has a
high oil import dependency due to its rapid economic development and lack of
domestic oil resources, which challenges its oil security. The government and
the national oil companies (NOCs) are the main actors to ensure China’s oil
supply. Based on the interactions between the government and the NOCs, the
overseas oil investments and the domestic oil production and strategic
petroleum reserves, together with the maritime oil transportation and
continental pipelines, provide alternatives for China’s oil supply in general
and in wartime in particular, thus forming the hedging mechanism for China’s
oil security. Notably, the energy revolution alters the way energy and
geopolitics interact, and the development of renewables in China and other
states in the world mitigates geopolitical risks by making China and the world less dependent on
unstable oil production regions. Lastly, the energy revolution triggers changes
in the hedging mechanism for China’s oil security due to the buildup of oil
reserves including the commercial oil reserves, the arduous development of
domestic oil output, and the drop in overseas oil investments but increase in
foreign renewables investments. And thus, China’s oil security and its
capabilities to respond to potential oil supply interruptions have changed
accordingly. This paper not only contributes to understanding China’s oil
security in the context of the energy revolution by analyzing the changes in
the hedging mechanism, but also stimulates thinking about the impacts of the energy transition on fossil
energy security.
Share and Cite:
Xie, H. (2021) China’s Oil Security in the Context of Energy Revolution: Changes in Risks and the Hedging Mechanism.
American Journal of Industrial and Business Management,
11, 984-1008. doi:
10.4236/ajibm.2021.119060.