Written by Tingbin Zhang, Zhonghua Yuan Institute

China’s island building on the four-mile-long and two-mile-wide Subi Reef in the South China Sea has put The U.S. in a tight spot. The reef lies within the 200-mile international limit of the Philippines and is only 26 miles from a Philippino occupied island. To protect its ally from China’s aggression, the U.S. will be left with little choice but to constrain China by military means.

However, it is not likely that the U.S. will directly engage China in war in the foreseeable future, because the U.S. dominates China with its superior naval and air force and the only way for China to level the playing field is to apply nuclear weapons. The nuclear nature of Sino-American warfare would make both the world no.1 and no.2 economy the fallen giants.

So there is a possibility that The U.S. might use economic weapons. One susceptible area at the core of China’s weakness is it’s huge dependence on oil imports. At the moment, China imports 55% of its oil, almost half of which sails from countries in the Persian Gulf, which amounts to 5.3 million barrels per day and is around 75% of Saudi Arabia’s production. As a matter of fact, China’s reliance on Middle Eastern oil has gradually grown orewtty much in line with its rapid-increasing demand for oil. Right now, China has achieved the equivalent of the peak of U.S. Oil import dependence and is not slowing down a bit. The single largest source of China’s crude oil imports is likely to remain Saudi Arabia.

China’s state oil reserves of 475,900,000 barrels (75,660,000 m^3) plus the enterprise oil reserves of 209,440,000 barrels (33,298,000 m^3) will only provide around 90 days of consumption or a total of 684,340,000 barrels (108,801,000 m^3).

Meanwhile, the U.S. is inching towards the energy independence. With the technological breakthroughs of shale gas and tight oil, the U.S. has started an energy revolution: U.S. crude oil production has increased by 50% since 2008. With that increase, as well as more efficient cars, oil imports have come down from their high of 60% in 2005 to 35% today – as low as in 1973. With domestic production and gasoline mileage still increasing, imports will continue to decrease. It’s also impressive that U.S. natural gas production has increased by nearly 33% since 2005, and shale gas has gone from 2% of output in 2000 to 44% today.