Abstract
The COVID-19 pandemic has seriously challenged the global oil market, and coronavirus-induced oil prices crash, oil demand decline and global economic recession affect China’s oil supply as well. China has high oil vulnerability due to its rising oil import dependency which aggravates Beijing’s concerns about oil security, despite at a time of the pandemic-induced oil oversupply. This study uses the SWOT analytical model to identify the strengths, weaknesses, opportunities and threats in China’s oil sector, and the changes in opportunities and threats caused by the COVID-19 pandemic. The pandemic has brought multiple impacts to China’s oil security. Results from the analysis show that the existing opportunities such as oil investments in the Belt and Road Initiative (BRI) and domestic upstream opening-up have been weakened; new threats that the uncertainty over global oil demand-supply and decrease in global upstream investments have emerged; opportunities that an increase in domestic strategic petroleum reserve (SPR) and low-carbon development are rising amid the pandemic. Notably, the COVID-19 pandemic has demonstrated the vulnerability of the global oil market to systemic risks and accelerated the transition to renewable energy.
Highlights
The COVID-19 pandemic has caused more disruption to the energy sector than any other event in recent history, triggering a considerable shock to international crude prices in 2020 and leaving uncertainties for the global oil market for years to come (IEA, 2020c)
Results from the analysis show that the existing opportunities such as oil investments in the Belt and Road Initiative (BRI) and domestic upstream opening-up have been weakened; new threats that the uncertainty over global oil demand-supply and decrease in global upstream investments have emerged; opportunities that an increase in domestic strategic petroleum reserve (SPR) and low-carbon development are rising amid the pandemic
Oil price volatility causes uncertainties and has dual effects on China‟s oil security: on the one hand, rising oil prices stimulate oil investments at home and overseas but at the same time high oil prices raise the cost in the oil industrial chain like refining, producing negative effects on national oil security and destabilizing socio-economic development; on the other hand, low oil prices contribute to social and economic development but they discourage investment enthusiasm and make the oil producers lack the motivation to invest in oil development which may negatively affect oil supply in the long term (Li &Leung, 2011; Wang et al, 2021)
Summary
The COVID-19 pandemic has caused more disruption to the energy sector than any other event in recent history, triggering a considerable shock to international crude prices in 2020 and leaving uncertainties for the global oil market for years to come (IEA, 2020c). Its oil demand rebounded quickly and by June 2020 it had reached 90 per cent of its pre-pandemic level (Xu,Kelly &Obayashi, 2020). The national oil companies (NOCs) suffered losses due to the low oil demand and oil price decline, forcing them to adjust the development strategies in response to the pandemic-induced challenges. Accelerated energy transition plans at all levels and in different energy sectors are proposed and implemented, as well as the green recovery plans against the pandemic at home and abroad.
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