US President Donald Trump has suggested the US will take over oil sales to Venezuela after the ouster of Nicolas Maduro. The next question is: who will buy it? a CNN analysis shows.
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China has long been among Venezuela's biggest customers, but appetite for the oil is waning as the country makes a rapid transition to renewable energy and electric vehicles.
That means China's oil imports are unlikely to be seriously disrupted by the recent US military operation in Venezuela and Trump's pressure on US companies to revitalize the country's oil infrastructure, experts told CNN. China will likely be able to source the amount of oil it needs from Russia or Iran.
The long-term trajectory of China's oil demand is pretty clear: It's already trending downward, analysts say. Moreover, many estimate that if the country has already reached peak demand, or at least that will happen soon.
CNN recalls that the Trump administration has suggested to the acting president of Venezuela, Delcy Rodriguez, that it is necessary for his country to cut ties with China, Iran, Russia and Cuba, in exchange for an exclusive partnership with the US in terms of oil production. Moreover, on Wednesday, Trump administration officials said that the US will be the one to sell Venezuela's oil.
In a statement to CNN, the Chinese foreign ministry emphasized that the business relationship between China and Venezuela is one “legitimate and in accordance with the interests of both parties”. Cooperation between the two countries “it is not related to any third party nor is it subject to third party interference”the Chinese foreign ministry added.
China's oil diet, an important factor
As the world's largest oil importer, trends in China are expected to have ripple effects on the global oil market.
Energy experts note that this trend shows how stark the differences are between the US and China's visions of the energy transition: China is sprinting towards renewable energy and electric vehicles, while the US is doubling down on oil extraction domestically and internationally.
In large part, this trend has been driven by changes in China's transportation sector, where gasoline-powered vehicles have begun to be replaced by electric vehicles. China is the leader in the electric vehicle market; of the 18.5 million electric vehicles sold globally last year, more than 11 million were sold in China, according to British research firm Rho Motion.
“It's just decisive; it's not going back there”explained Li Shuo, director of the China Climate Center at the Asia Society Policy Institute. Compared to the progressive implementation of electric vehicle policy in the US, electric vehicles are taking root in China.
And with the domestic market becoming saturated with electric vehicles, Chinese companies are actively looking for other global markets. China's BYD – which recently overtook Tesla as the world's biggest seller of electric vehicles – exported a record number of vehicles worldwide this year, Rho Motion data shows.
“We are now seeing how China's electric car story is being replicated in other parts of the world, and very interestingly, more so in the Global South than in the US and European countries”Shuo said.
Predictions for the oil market
While oil demand from the transportation sector may have already peaked, demand from other sectors, including petrochemicals and jet fuel, is expected to continue to grow. About 400,000-500,000 barrels of Venezuelan oil a day end up in China, says Janiv Shah, vice president of commodities market research at Norwegian energy firm Rystad. And that of Venezuela represents a small percentage of China's total oil imports.
“Any US intervention could force this percentage to drop dramatically, as we see this move as a symbolic attack against China on a global scale,” Shah explained. He added that China would still have access to oil supplies from other countries, however. “Chinese refiners will likely turn to discounted sanctioned oil from Iran and Russia.”
“Venezuela is very dependent on China as a market, there's no doubt about that,” added Shuo, director of the China Climate Center at the Asia Society Policy Institute.
In the long term, US intervention in Venezuela could only possibly strengthen China's desire for energy independence – which will likely seek to produce more energy domestically and thus cut dependence on foreign energy sources that can be disrupted.
Last year, China was building 510 gigawatts of solar and wind capacity, according to Global Energy Monitor, an impressive addition to the 1,400 gigawatts already operational.
China pledged to get even more in September, pledging to increase deployed wind and solar capacity to 3,600 gigawatts — six times more than in 2020. The country is also building nuclear power plants and has an aggressive program to tap into fusion power – an almost limitless source of clean energy.
China is rapidly moving towards the energy of the future, while the US foray into Venezuela to exploit oil shows that it is stuck in the energy of the past, Shuo pointed out.
“The world's largest economy takes a petrostate approach”Shuo said. “This fact only reinforces the idea that the United States is going backwards on the energy transition, and moreover, is very willing and able to deploy military forces to achieve this goal.”
