US energy independence: Disaster or blessing for China?

With revolutionary shale gas and shale oil technologies, the U.S. is, as President Obama said in his State of the Union address in January 2014, closer to energy independence than ever. How such independence affects China has been a popular issue for studies in China in recent years. The assessment of the impact of the U.S. energy independence on China is characterized with a strong sense of uncertainty, vulnerability and insecurity.

China states three main goals in its energy policy: security, efficiency, and environmental protection, with energy security being the top priority. In the Chinese lexicon, energy security first and most importantly means the secure and uninterrupted supply and transportation of foreign energy resources back to China. According to recent studies by the State Council, by 2030, China will import about 75 percent of the 800 million tons of its annual domestic oil consumption. How to secure the stable and constant supplies of such a large volume, diversify the sources to mitigate vulnerability, and ensure their safe transportation back home has become a serious challenge for China. China’s insatiable need for energy security is the primary motivation for its fervent global acquisitions of energy assets and development of pipelines with Russia, Central Asia, and Myanmar in recent years. Since 2009, Chinese oil companies have spent more than $100 billion on oil and gas assets to boost imports.

From the pure perspective of energy security, the Chinese perception of U.S. energy independence is largely negative: an energy-secure United States, in the view of many Chinese, will damage China’s energy security through either actively manipulating or passively fostering the instability of oil-producing regions/countries. Many Chinese analysts believe that from a geopolitical point of view, the independence of the United States from Middle Eastern oil will translate into reduced interests and deployment in the area, leading to regional chaos that will significantly damage China’s energy supply and shipment. China relies on the Middle East and Africa for the largest share of its crude oil supplies, freeriding with the security and stability Washington currently provides. However, if the United States is to reduce its role in the region, it would expose China to tremendous geopolitical and security risks.  

Some Chinese analysts believe that an energy-secure United States will undercut China’s energy supplies by stirring up tension in the region because Washington will conceivably be less-constrained and potentially more radical in imposing democratization or nuclear non-proliferation in the Middle East. Conspiracy theorists argue that Washington might even purposefully pursue such policies so as to disrupt China’s energy supply.

For the pessimists, U.S. energy independence is bad for China’s economic development. In their view, after the United States becomes an exporter of energy resources, it will manipulate the energy price on the international market to maximize its own profits while suppressing the growth of emerging markets, especially China. As long as the United States can balance the reaction of domestic consumers, it will chase up the price of the primary commodities globally to increase the costs of China’s industrial development. The hypothesis further extends into the ideological realm, that U.S. will use its own example of energy technology innovation and independence to boost the legitimacy and desirability of the western development model and demonize China’s growth model.

Chinese analysts who focus on energy issues, rather than the broader national security, are more optimistic. They believe the United States’ exports of surplus energy will increase global supply while challenging existing suppliers such as Russia. This would both enhance supply and drive down the price. Furthermore, since China has become more vulnerable, U.S. energy independence will force China to face up to its addiction to foreign and fossil fuels. Indeed, the rising pressure has pushed Beijing to focus on reducing overall domestic consumption as well as increasing the domestic energy production, facilitating and expediting China’s reform of its energy consumption and structure. Given China’s own shale gas reserve, many call for China to seek either independent technological renovation or collaboration with U.S. companies to develop China’s shale gas potential.

It remains to be seen whether U.S. energy independence and potential reduced commitment to the Middle East would push China to change its foreign and security posture in the region. U.S. experts have long-argued that China has to assume its long overdue responsibility in the Middle East to protect its own oil interests. However, even now, when speculations about a U.S. pullout are higher than ever, China feels far less compelled to act than U.S. experts would like to see until such pullout is confirmed. Preparations for such a scenario are being made, but Beijing will not take actions until the scenario indeed happens.  

Sun is a fellow with the East Asia program at the Stimson Center.