China’s recent acquisition of oil reserves has piqued the world’s interest and fueled suspicion about its intentions. Is China taking advantage of cheap oil prices, or is it planning an invasion of Taiwan?
The Economic Justification
The first and most obvious reason for China’s oil hoarding is a strategic attempt to ensure a cost-effective oil supply from Russia and Iran. Due to Western nations’ unwillingness to deal with them, both countries have been forced to sell severely discounted oil. As the world’s top energy user, China is taking advantage of this chance to increase its oil reserves.
Reasons supporting this explanation:
China’s Growth and Energy Needs: As a country devoted to economic growth, China’s goal to build oil reserves corresponds to its standing as the world’s largest energy user. Stockpiling inexpensive oil can help it develop further.
Global Energy Dynamics Are Shifting: With increased pressure to shift to greener energy sources, existing energy sources such as oil may become scarcer and more expensive in the future. China’s choice to store oil is a deliberate attempt to protect essential resources before they become more difficult to access.
The Insidious Reason
A more serious scenario is that China’s oil stockpile is part of a wider strategy that includes an invasion of Taiwan. While this may appear excessive, it cannot be disregarded completely. Scholarly writings from respected universities have emphasized rising tensions between China and Taiwan, implying the possibility of violence.
Why would China require vast amounts of oil for such an invasion?
International penalties: If China commits a flagrant act of aggression, such as invading Taiwan, Western nations are likely to apply harsh penalties. These sanctions might limit or completely cut off China’s access to oil, making a large stockpile critical to its success.
Military Actions: An invasion of Taiwan would necessitate a large deployment of military forces. In October 2021, China flew a record 103 airplanes over Taiwan during a visit by US officials, demonstrating China’s military readiness. Such steps would entail a greater use of oil to fund military operations.
Implications for Investors
In the face of potential geopolitical turmoil, investors must plan for unlikely but not impossible scenarios, such as a clash between China and Taiwan. The market’s reaction to previous geopolitical crises, such as Russia’s invasion of Ukraine, demonstrates how quickly global events may effect financial markets.
Considerations for investors include:
Diversification: Diversifying one’s portfolio is always important, but it becomes even more important in times of global uncertainty. Spreading assets across asset classes, industries, and locations can help to offset the effect of unanticipated occurrences.
Research and Adaptability: It is critical to be updated about world events and modify investing plans accordingly. Tensions between China and Taiwan, as well as other geopolitical events, could influence business decisions.
Long-Term Considerations: Keeping a long-term perspective is critical in times of uncertainty. While geopolitical crises might cause short-term market swings, historical evidence indicates that most markets are resilient and can rebound over time.
China’s intention to stockpile oil reserves has sparked conjecture and alarm about its motivations. While the economic argument of profiting on cheap oil is feasible, wise investors should not rule out the more sinister possibility of a Taiwan invasion. Investors may better manage these difficult times and protect their investments by being educated and taking a long-term perspective in the face of uncertainty.
Source: Entrepreneur via Newsbreak