Since the United States and Israel launched military strikes against Iran, maritime traffic in the Hormuz Strait has been disrupted, causing severe fluctuations in the global energy market. However, while Western countries are anxious about oil supplies, China has managed to stay afloat during this crisis, thanks to its diversified supply chain and advanced new energy technologies.
On June 12th, local time, Jeffery Currie, a senior advisor to the Cargill Group, wrote an article for the Financial Times in the UK. He stated that former U.S. President Jimmy Carter had warned about the importance of energy security in the 1970s. However, while China has invested heavily in energy security, Western countries have not followed Carter’s advice, and as a result, they have paid a price.
Currie proposed the concept of what he called the “new Joule order,” suggesting that this model is gradually becoming dominant in the energy market and the global economy. He believes that in this era, energy security has replaced climate policy and cost-benefit considerations as the dominant factor shaping investment flows, geopolitical alliances, and commodity prices.
In the past decade, many countries have underestimated the importance of physical energy security. However, as the Iran conflict has had a significant impact on the global oil supply, the market is paying for those blind optimism. Curry said that the Gulf of Hormoz crisis was a “major test of pressure,” revealing which countries were well-prepared and which ones had to react in a hurry.
The article states that China has taken numerous measures to enhance energy security. Rongding Group estimates that China’s installed solar power capacity has exceeded 1.2 billion kilowatts, and it has the world’s largest nuclear power projects under construction. Electric vehicles could save up to 1 million barrels per day in petroleum consumption.
June 10th, Jumacun Village, Yundian Town, Fangxian County, Shiyan City, Hubei Province, Photovoltaic Power Generation Base
Electricity can originate from coal, natural gas, solar energy, wind energy, or nuclear energy. Internal combustion engines are limited to one fuel source, and the supply of this fuel also requires traversing international maritime routes controlled by other countries,” Kerry wrote. “Electrification essentially involves purchasing ‘choice rights’, with China’s choice rights being much larger than those of any other country.”
Kerry pointed out that China's energy imports have decreased recently, which some have interpreted as a so-called "demand collapse". However, the reality is quite the opposite. China is exercising its "choice" under the background of rising oil prices.
He cited an example: during the “May Day” holiday, the number of electric vehicle charging sessions on Chinese highways increased by 56% year-on-year, indicating that Chinese car owners are shifting to electric vehicles. At the same time, industrial users in China have switched to domestic coal. This gives China the flexibility to adjust its oil demand. “China’s energy imports may seem unsustainable, but in reality, they have already made sufficient preparations.”
Compared to China, Western countries still use old strategies. Since the Iran war, US crude oil exports have increased by 2 million barrels per day. The US government refers to this as "energy dominance." However, most of these additional exports come from inventories. The US strategic oil reserve has dropped to approximately 342 million barrels, reaching its lowest level since August 1983. It is likely to reach a critical low before the autumn of this year.
Curry believes that the US's practice of reducing oil prices by selling its oil stocks is a way of sacrificing its own energy security, delaying further investment in energy security. As demand for air conditioning, agricultural refrigeration, and transportation increases in the third quarter, the US will no longer have any room for buffer measures.
In February 1977, then-U.S. President Carter gave a speech emphasizing that energy is limited, and safety can only be achieved through individual efforts. Carter introduced the concept of “energy transformation.” At that time, this term was not yet associated with the environment; it described the importance of building national energy security.
February 2, 1977: President Carter gave a speech on national energy issues. Video screenshot
Curry recalled, “Katritzky called on the public to make sacrifices, but he stumbled into a mess. The media scoffed at his speech, and the United States Congress ignored him. This honesty accelerated the end of Katritzky’s presidency to some extent. His successor reached a conclusion: never acknowledge energy shortages. Whenever faced with supply shocks, their strategy was to suppress prices through speeches, consume strategic reserves, and hope that supplies would recover before they ran out.”
Article comments suggest that the process of reshaping the global energy market will not be gradual. Energy cannot be created out of thin air, and over-drawing inventories does not guarantee energy security. “China has listened and chosen to invest in energy security, and now it has reaped benefits; the West refused to follow Carter’s advice and is now paying the price.”
