Chinese Strategic Reserves Pushing Oil Prices

While multinational oil companies, headed by American supermajors, are being booted out of projects from Russia to Venezuela, China's oil companies are thriving. And the more they thrive, the bigger China's demand for energy. The bigger China's demand, the greater the need for strategic oil reserves.

While the supermajors are pilloried elsewhere for their part in global warming and environmental degradation, there are no qualms in China over acknowledging energy's importance and its role in the country's breathtaking economic evolution. PetroChina, Sinopec, and CNOOC not only enjoy great public acclaim but also, in headline after headline, are presented as patriotic entities, intimately connected to China's national interest, and at times their actions are indistinguishable from national policy.

In early July, when PetroChina announced that it will build a commercial oil reserve in Xinjiang, along with similar moves by Sinopec and Sinochem, the Chinese press quickly connected them with the strategic petroleum reserve. "The construction of the commercial reserves is a concrete step taken to build up the national oil reserves system," according to the China Daily. Also apparent is the urgency with which the reserves are to be built and commissioned, within a year or two of the announcement. Similar projects in other major consuming countries would be hard-pressed to complete environmental studies by then.