How China Curbed Its Oil Addiction—and Blunted a U.S. Pressure Point
Government boosts domestic production and EV industry in the name of national security; 14 million chargers
July 21, 2025
BEIJING—China’s thirst for oil drove global demand for decades. Now a government campaign to curb that addiction is nearing a milestone, with national consumption expected to peak by 2027, then begin to fall.
Chinese officials have long worried that the U.S. and its allies could hamstring the nation’s economy by choking off its supply of foreign oil. So China has poured hundreds of billions of dollars into weaning itself off the imported stuff by reviving domestic production and swiftly building the world’s leading electric-vehicle industry.
“The energy rice bowl must be held in our own hands,” Chinese leader Xi Jinping has said.
Across China, fleets of gas-guzzling Volkswagen and Hyundai taxicabs are being replaced by electric models designed and produced locally. Last year, nearly half of passenger vehicles sold in the country were either all-electrics or plug-in hybrids, compared with 6% in 2020.
In a remote corner of China called the “sea of death” for its harsh conditions, oil workers are trying to coax more crude out of the ground by drilling holes as deep as Mt. Everest is high. State-owned PetroChina reported $38 billion of capital expenditures last year, nearly as much as Exxon Mobil’s and Chevron’s combined.
China boosted oil output by 13% from 2018 to 2024, to around 4.3 million barrels a day. Crude imports fell nearly 2% last year, though they have rebounded slightly this year as some Chinese companies built stockpiles.
China’s biggest state oil companies and the International Energy Agency all forecast that China’s demand for oil will likely peak within two years, while gasoline and diesel demand has already topped out.
China won’t stop importing oil. It still brings in roughly 11 million barrels a day, about 70% of what it consumes, up from less than three million a day 20 years ago. And overall oil consumption is likely to decline only gradually as China’s demand for oil to make petrochemicals continues to grow.
Nevertheless, Xi’s campaign will have ramifications for global energy markets, with billions of dollars of Chinese oil imports projected to vanish in coming years. In June, the IEA, a Paris-based organization that tracks global oil consumption, slashed its forecast for Chinese demand in the 2028-30 period by more than one million barrels a day from its year-earlier prediction.
Many oil-exporting nations are eager to retain a slice of China’s market. Russia has been selling oil to China at a discount to ensure Beijing keeps buying. Saudi Arabia has invested in Chinese refineries to shore up long-term contracts to supply those facilities with oil.
During a trip to Beijing in March, Saudi Aramco’s chief executive lavished praise on China, telling Xi that China was “inspirational and admirable” and “an oasis of certainty” in an unpredictable world.
The campaign has been costly for China’s government. The Center for Strategic and International Studies in Washington pegged Chinese government support for electric vehicles at $231 billion from 2009 to 2023. Many of the nation’s electric-vehicle makers are unprofitable. Overproduction has spurred a brutal price war at home, and rising EV exports that have fueled trade tensions.
Energy ‘revolution’
In late 2013, when China overtook the U.S. as the world’s biggest net oil importer, its reliance on foreign crude looked set to grow unchecked, accounting for about half of global demand growth over the prior decade.
Soon after, Xi gathered his economic team and told them China needed an energy “revolution” to protect national security.
Beijing was leery of relying too much on Middle Eastern oil, which had entangled the U.S. in that region’s conflicts for decades. Xi also was facing domestic discontent over choking smog, attributable in part to the surging numbers of cars on China’s roads.
During the first Trump administration, as relations between the two nations deteriorated, Chinese government strategists grew concerned about the nation’s reliance on the Strait of Malacca. Most of the ships importing oil and gas to China go through that narrow passage near Singapore, leaving them susceptible to intercept by the U.S. Navy in the event of a conflict.
U.S. Deputy Secretary of Commerce Paul Dabbar has estimated that if China lost access to all seaborne oil-and-gas imports, its economy could shrink by as much as 17%.
Xi’s call for action ignited a flurry of government activity to boost its nascent EV industry. Not only would EVs help slash oil demand, they offered China a chance to leapfrog automakers in the U.S. and elsewhere after years of struggling to catch up to them in producing internal-combustion engines.
To reduce the cost of EVs, Beijing exempted them from a 10% sales tax—a program estimated to have cost more than $100 billion since 2018.
Nearly 500 companies sought to make EVs. Some were founded by executives with little experience running car companies, who burned through government money before flopping. By 2019, EVs and plug-in hybrids accounted for only a fraction of the market, with many Chinese consumers still hesitant to make the switch.
The turning point came late that year when Tesla, with strong backing of Shanghai’s government, opened its first factory in China.
“For the first time, Chinese consumers saw a really appealing, futuristic automobile,” said Michael Dunne, chief executive of auto consulting firm Dunne Insights. “It was good-looking, it was fast, it had all these highly attractive elements to a consumer.”
As EV sales surged, the government ramped up subsidies for companies to build public charging ports. It also required new apartment buildings to provide infrastructure enabling residents to easily install their own.
As of May, China had more than 14 million charging points, nine times as many as at the end of 2020. The U.S., by comparison, has around 230,000 public and private chargers, in addition to hundreds of thousands at private homes that are more difficult to track.
In Shanghai, the city provided EV buyers with free green license plates while auctioning plates for traditional cars for more than $10,000.
Cities replaced diesel-powered buses with electric ones. By 2023, more than 80% of China’s city buses were all-electrics or hybrids.
Chinese battery maker Contemporary Amperex Technology reported $18 billion in net profit over the last three years and invested more than $7 billion into research and development. Today, CATL and rival BYD say their R&D spending has enabled each of them to develop technology to charge cars in just five minutes.
These days, China’s EV factories are symbols of its manufacturing prowess. Less than 100 miles south of Tesla’s Shanghai operation, Chinese carmaker Zeekr has automated entire processes such as welding, with more than 800 robots doing the work.
One of its cars, the Zeekr 001, has a range of up to 466 miles—about 180 miles more than the median range of an EV in the U.S. Inside a showroom recently, a salesman voice-activated a massage function built into the driver’s seat, while one of the car’s apps played Chinese karaoke classics on a video screen.
In the U.S., sales of EVs and hybrids have risen more slowly than in China, to 20% of light-vehicle sales at the end of last year, from 12% in early 2022, according to research firm Omdia. But high EV inventory levels at some dealerships suggest a limit to U.S. demand, and Congress is scrapping tax credits of up to $7,500 for EV purchases to save money for other priorities.
Drilling push
China’s desire for energy independence dates all the way back to former leader Mao Zedong, who once dispatched tens of thousands of workers to search for oil in China’s northeast to ensure China wouldn’t be dependent on imports.
The discovery in 1959 of a massive deposit near the city of Daqing became the stuff of Communist Party lore, with “Daqing Spirit” coming to mean hard work in the face of challenges. But production at Daqing and other fields couldn’t keep up with the surge of demand following China’s economic reforms.
As the government prioritized EVs, state companies began cutting domestic oil output, preferring to import more of the crude they needed from less expensive sources abroad.
In July 2018, Xi personally intervened, ordering state-owned companies to revive domestic production to safeguard national security.
Three state-owned oil majors invested an additional $10 billion the following year in exploration and production. They zeroed in on offshore areas such as the South China Sea and the Bohai Sea off the country’s northeast coast, as well as remote reserves near China’s western border with Kyrgyzstan, in a region called the Tarim Basin.
Cnooc, the company focused on offshore reserves, accelerated its drilling cycles to bring oil fields online more quickly. It teamed up with Chinese technology giant Huawei to digitize its operations, using tens of thousands of sensors to collect data and improve decision-making.
By 2023, the Bohai oil field accounted for 50% of the growth in China’s oil output. Cnooc also increased production in the South China Sea by more than a quarter since 2020. In that expanse of water off South China, the government has aggressively enforced disputed maritime claims against its neighbors.
Cnooc said in a written statement that it aimed to raise its total oil-and-gas production as much as 15% between 2024 and 2027, and that two-thirds of its production would continue to come from China.
In the deserts of the Tarim Basin crews are exploring some of the nation’s deepest reserves. Summer temperatures can top 120 degrees, and in the winter they can hit minus 20. Such ultradeep exploration is expensive, with some wells costing three times as much as shallower traditional wells, a Chinese oil executive told state media.
In 2023, Xi held a video call with Tarim Basin oil workers, praising their “indispensable contributions” to the nation. About 5% of China’s total oil and gas output last year came from the basin’s deep reservoirs, a number Chinese oil executives intend to increase.
As of May, PetroChina’s parent company, China National Petroleum, said it had drilled 193 wells in the Tarim Oilfield at least 5 miles deep. In the U.S., many wells are a mile or two deep.
In February, the company said it completed its deepest-ever exploratory well—the Shenditake 1—at nearly 7 miles deep. State media said it is the world’s second-deepest vertical well, after a scientific well drilled by the Soviets many years ago.
“Advancing into the deep-Earth is the only path forward for the future development of oil and gas in our country,” said PetroChina vice president He Jiangchuan.
A sign greets workers at the gates of the drilling site. “Challenge the forbidden zone to forge the tools of a great power,” it said. “Strive to become pillars of guaranteeing energy supply.”
Grace Zhu contributed to this article.
Write to Brian Spegele at Brian.Spegele@wsj.com
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Appeared in the July 23, 2025, print edition as 'China Seeks to Break Its Addiction to Oil'.