Oil Import Diversification in Northeast Asia: A Comparison between China and Japan

Article excerpt

In this article, we explore why oil import patterns differ between states with a view to understandin9 the relationship between agent-based explanations such as strategy and structural explanations--for example, geography. We compare degree of diversification between China and Japan in an effort to explore the relationship between agency and structure in the formation of energy security policy. The China-Japan comparison is contextualized with reference to the baseline case of the United States, a well-diversified importer. We employ the Shannon-Wiener index of diversity to assess the extent of oil import diversification, and temporal chan9es in diversification for China, Japan, and the United States. A key findin9 is that China's statist approach has allowed it to diversify its sources of imported oil more quickly than Japan's hybrid approach. In fact, since becomin9 a net oil importer in 7993, China's sources of imported oil have diversified quite rapidly. Japan's overreliance on the Middle East for much of its imported oil has been endemic since 1973. KEYWORDS: China, Japan, oil imports, diversification, energy security, geography, strategy

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Safety and security in oil lie in variety and variety alone.

--Winston Churchill

OIL IS THE KEY TO THE ENERGY SECURITY OF ENERGY-IMPORTING COUNTRIES, and concerns about the security of oil imports dominate energy policy thinking and making. Indeed, for many policymakers, energy security equates to oil security (Alhajji 2007). Moreover, the vast majority of the literature on energy security focuses on oil (Fried and Trezise 1993; Stringer 2008), and oil is viewed as the most important traded commodity in the world economy (Noreng 2002). With a 35 percent share in 2009, oil is the world's most widely used source of energy, and with 2,600 million tons of crude oil and petroleum products traded in 2009--three times more than natural gas and liquefied natural gas (LNG) trade combined--it is the most traded energy resource (BP 2010). Importantly, the oil market is the benchmark for other energy and commodity markets and is the most imbalanced of all energy markets. The Asia-Pacific region, Europe, and North America consume approximately 80 percent but control only 10 percent of the world's oil reserves. At the same time, Africa, the former Soviet Union, the Middle East, and South America consume 20 percent, while controlling 90 percent of the world's remaining oil reserves (BP 2010). This geographic imbalance presents a significant challenge to insecure energy-consuming states.

Energy-importing states adopt a variety of strategies to provide for energy security, which are almost exclusively designed to mitigate the risks associated with supply disruption. These include diversification of types of fuels used, diversification of transport routes, measures to secure access to energy at the source (i.e., through equity oil), energy conservation, energy efficiency, technological innovation, stockpiling, increased domestic production, improvements in energy infrastructure, increased international cooperation among the importers, and improved political relations with the exporters.

A final method, arguably the most important if Churchill is to be believed, is the diversification of import sources: trying to import energy supplies from as many different regions and countries as possible. Diversification militates against supply disruptions due to political or environmental crises in one area of the world. While there are many components to a diversified oil import portfolio, two government strategies have attracted much attention in recent years: resource diplomacy and equity stakes. The former is a process by which an importing state uses the edifice of foreign policy tools to gain preferential access to an exporting state's upstream and downstream energy sectors. The latter aims to ensure a degree of supply security by allowing the importing state to buy resources directly from producer countries rather than from the spot market. …