Global oil and gas prices have been soaring recently. Oil prices are influenced by geopolitics as well as market supply and demand. In 2021, the spatiotemporal mismatch (imbalance) of oil supply and demand industry chain caused by the outbreak of COVID-19 pushed oil prices up sharply.
The drastic fluctuation of international oil prices has brought a lot of inspiration to China's energy transformation and energy security.
At present, China's oil and gas market is characterized by "rapid growth in demand but slow growth in supply", resulting in increasing dependence on foreign markets. To reduce the dependence on foreign markets, we can start from two aspects: one is to save oil and the other is to replace petrol vehicles. We need to raise the development of electric vehicles to a strategic position to ensure China's energy security.
In recent years, with strong support of the government's preferential policies, China's electric vehicle technology has made rapid progress, and the size of the industry chain has become the world's first. At present, China has been able to manufacture electric vehicles with international standards and independent intellectual property rights. The following lists the advantages of China electric vehicle development: First, electric vehicles are important part of the new energy industry. China needs to develop new energy to change the energy structure and tackle climate changes, and also needs to reduce oil dependence on external markets to ensure energy security. Therefore, China has strong driving force to develop the new energy industry. Second, development of the electric vehicle industry needs capital and technological input which cannot be satisfied by the capital market alone. The government of China can boost the rapid development of the industry by taking advantage of policies and capital. China has had the capability of large-scale scientific research, and relatively low costs of R&D and manufacturing are also important advantages. Third, China is the world's most important market for vehicle increment, providing a broad space for the development of electric vehicle technology and related industries.
Energy security needs to be taken into account in the process of carbon neutrality in China. China is the world's largest importer of oil and gas, and the current high oil and gas prices have boosted China's motivation to develop new energy sources. This February the National Development and Reform Commission and the National Energy Administration issued a notice on the planning for large wind and photovoltaic power stations in sandy areas, Gobi and deserts. By accelerating the strategy of new energy (wind power, photovoltaic power), transportation (UHV and hydrogen energy) and electric vehicles in West China, China shall make the energy development gain a foothold in domestic production capacity, while meeting requirements of the low-carbon development strategy and ensuring national energy security. As the cost of wind and photovoltaic power decreases year by year, the construction of large-scale wind power and photovoltaic power stations will bring obvious growth space for the development of the industry. Driven by the policy, new energy industry chains will be developed relying on large new energy bases, and new energy-related industries such as hydrogen storage and UHV energy will also see rapid growth.
At present, China should nail down the role of strategic petroleum reserve as the stabilizer for national economy and people's livelihood. Under the background that electric vehicles and clean energy have not entirely replaced petroleum, China should vigorously promote oil and gas reserve and production, strengthen exploration and development of domestic oil and gas resources, and meanwhile reduce the dependence of strategic energy sources such as oil and gas on external markets and enhance the capacity of domestic energy production by making coal usage cleaner and more efficient. At the same time, China still needs to further expand its oil import channels and continue to enhance its influence in international crude oil trade.
Lin Boqiang, director of China Institute for Studies in Energy Policy at Xiamen University
Issued on March 17, 2022