(Yicai) April 7 -- Despite a big rise in international oil prices amid the conflict in the Middle East, China has not panicked over energy supply. Both transportation costs for residents and industrial production have not shown substantial fluctuations following the outbreak of the crisis.

The improvement in the Chinese energy market's ability to withstand external shocks is closely related to the continuous expansion of the country’s strategic oil reserves in recent years, which has provided a strong buffering capacity. China's oil reserves have reached 1.2 to 1.4 billion barrels, equal to around 115 days’ worth of maritime crude oil imports, according to market estimates.

In the medium to long term, the construction of a renewable energy system has strengthened China's resilience in responding to oil crises. As the installed capacity of renewable energy, such as wind and solar power, continues to expand along with the widespread adoption of electric vehicles, heat pumps, and other electrified end-use devices, an increasing amount of energy consumption is shifting from the direct use of oil or natural gas to electricity.

This means that the construction of a renewable energy system not only aims at achieving the low-carbon transformation of the Chinese economy but has also become an important component of national energy security. Promoting electrification in the transportation, power, and industrial sectors can reduce the sensitivity of China's economic activities to fluctuations in external oil and gas prices.

Transportation is the sector with the highest concentration of oil consumption, but also the one where renewable energy can be most directly substituted. China's new energy vehicle penetration rate has significantly increased. In addition to passenger cars, the electrification process of commercial vehicles, such as buses, taxis, and urban logistics, is also progressing rapidly. First-tier cities like Shenzhen have basically achieved full electrification of public transportation vehicles.

Unlike Europe and Japan, the proportion of natural gas in China's power generation is very low, as it primarily relies on coal and renewable energy sources. In recent years, the country has vigorously developed wind and solar power, building the world's largest green energy system. Therefore, the supply disruption of liquefied natural gas caused by the blockade of the Strait of Hormuz has a very limited impact on China's electricity market.

Coal-fired power accounted for nearly 55 percent of China's total energy consumption last year, compared with only 3 percent of natural gas power, according to data from Low-Carbon Power. The combined share of renewable energy power consumption -- hydropower, wind power, solar energy, and nuclear energy -- was about 42 percent.

In the Chinese industrial sector, oil consumption is still hard to replace. Unlike the transportation industry and residential energy use, which primarily see energy as a source of power, industrial production not only relies on energy to fuel equipment but also to maintain the sustained high-temperature environments necessary for production. Moreover, oil itself is a key raw material.

The energy structure for industrial use is not unchangeable. But in the future, it is possible to replace diesel and fuel-powered systems with electrified equipment, transforming processes that traditionally consume oil into others driven by electricity. As the proportion of renewable energy in the electricity supply gradually increases, the industrial sector's dependence on fossil fuels will likely decline over time.

The safety of China's renewable energy system also depends on the collaborative capabilities of the entire industrial chain and infrastructure. If there is insufficient energy storage and an inadequate power grid, or if key equipment and core materials still rely on external supply, then there will be vulnerabilities in energy security.

Therefore, the development of China's renewable energy system cannot be separated from the upgrading of energy infrastructure and the localization of key equipment, which will ultimately lead to the establishment of a more comprehensive energy security system.

The author is Liu Xin, a researcher at the Yicai Research Institute.

Editors: Tang Shihua, Futura Costaglione