Oil still runs the world, but its role in geopolitics is changing

China and the rest of the world remain thirsty for oil. That means the commodity’s central and volatile role in geopolitics continues, with decades-old realities driving economics, trade, alliances and conflicts for the countries dependent on fossil fuels. Yet, change lies ahead.

Last month’s short-lived rally underscores oil’s mercurial clout. Brent crude hit a four-month high of US$82 a barrel after the United States expanded sanctions on Russia and Iran. Oil-supply news shocks continue to have an immediate and enormous impact on the global economy; other policy shifts such as tariff increases matter too.

Meanwhile, after years of production cuts, Opec+ members refuse to ramp up supplies before April, if even then. US President Donald Trump wants America to “drill, baby, drill”, thereby forcing prices down to the detriment of oil-producing states like Russia and Saudi Arabia. While traders remain hopeful that Beijing’s stimulus, including the first easing of monetary policy in 14 years, will boost China’s appetite for oil, an unsteady, tepid recovery might persist.

Global oil consumption is likely to peak by 2030, assuming that the world remains roughly the same, the International Energy Agency forecasts. On the other hand, the Organisation of Petroleum Exporting Countries does not see peak oil happening any time soon.

In the short term, imports by China, the world’s largest buyer of crude, are likely to rise by only 1 per cent this year, driven partly by production of petroleum-based chemicals as electric vehicles reduce consumption of petrol. China’s dependence on imports is projected to remain around 70 per cent between 2026 and 2030, according to state energy giant China National Petroleum Corporation (CNPC), with Russia supplying nearly 20 per cent of crude imports.

Much of the outlook for oil consumption by China and the rest of the world will depend on when the “age of electricity” arrives – an era when production of kilowatt-hours increases exponentially through renewables and nuclear power as costs plummet.

  

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