Since 2010 there has been a significant increase in US oil production which has made them much less reliant on other oil producers – oil and gas production has increased over 50% and the US is the biggest producer of both. Being less reliant on oil imports means that the US can now have greater power of nations that they used to import oil from – Iran, Venezuela and Russia. According to The Economist being the biggest producer of gas and oil doesn’t mean as much today for three reasons:
- There is no longer fossil fuel scarcity as the demand for oil might have already peaked and with an abundance of supply prices have dropped significantly.
- Countries that are reliant on fossil fuels now realise that for the sake of climate change they need to change their energy source to a more natural option of power.
- Solar panels and wind turbines generate electricity instantly whilst fossil fuels provide energy to a medium which then generates the electricity.
In considering the above this paradigm shift does more for China than the USA. Even though China is the biggest importer of fossil fuels it is a leading exponent of renewable energy at gigawatt scales. However China is in a very good position to secure oil imports as:
- The increase in supply from new sources – Brazil, Guyana, Australia (LPG), and shale from the US – has meant a buyers market and this has suited the Chinese.
- China is also in a very strong position with those struggling oil producing countries in that it has given them oil-backed loans.
- China Development Bank lent two state-controlled Russian companies, Rosneft, an oil producer, and Transneft, a pipeline builder and operator, $25bn in exchange for developing new fields and building a pipeline which would supply China with 300,000 barrels of oil a day.
China energy sources:
- Coal-fired – more than 1,000 gigawatts (GW) of generating capacity which makes it the world’s biggest carbon-dioxide emitter. Coal use is set to expand in the years to come.
- Wind and solar capacity – 445GW, vast though it is by most standards, But China also has Hydropower capacity – 356GW of more than the next four countries combined.
- Nuclear power – building plants faster than any other country; nuclear, which now produces less than 5% of the country’s electricity, is set to produce more than 15% by 2050.
Wind and Solar
Both wind and solar power require raw materials to be functional – non-ferrous metals like copper. Batteries require zinc, manganese and potassium. Although there is a lot of supply of these commodities it is the difficulty of getting them to the market that is the problem. China has helped here through domestic investment – it now produces 60% of world’s ‘rare earths’. It now looks overseas to Chile to secure lithium on which batteries now depend on.
China – produces more than 70% of the world’s solar modules and can produce over 50% of its production of wind turbines. It dominates the supply chain for lithium-ion batteries – 77% of cell capacity and 60% of component manufacturing. In 2019 China eased restrictions on foreign battery-makers – costs of solar panels and batteries have dropped by more than 85% in the past decade.
To maximise its electrostate power China needs to combine its renewable, and possibly nuclear, manufacturing muscle with deals that let its companies supply electricity in a large number of countries.
Source: The Economist – The changing geopolitics of energy. 17th September 2020
ECONFIX 