Geopolitics, Global Patterns of Oil Trade, and China’s Oil Security Quest

29 Pages Posted: 26 Oct 2011 Last revised: 22 Jul 2022

Date Written: October 26, 2011

Abstract

This working paper was written by Sergey Mityakov (Clemson University), Heiwai Tang (Tufts University) and Kevin K. Tsui (Clemson University).

Does China’s quest for oil raise tensions with the United States? This paper examines the effect of international relations on global oil trade patterns. Using voting records for the United Nations General Assembly to measure the state of international relations, we estimate a modified gravity model in a panel data framework over the period 1962-2000. Our presumption is that a divergence in voting patterns reflects misalignment in political interests among pairs of states, and hence an increase in “political distance.” Controlling for oil exporters’ endowment, potential supply disruption due to civil conflict, other standard gravity controls, as well as exporter and year fixed effects, we first show that private energy companies based in the United States import significantly less crude oil from US political opponents. The result is robust to controlling for economic sanctions and militarized interstate disputes, suggesting that the political oil import diversification is more than a wartime phenomenon. A similar oil import pattern is observed in China, in which case only a few national oil companies control the oil sector. While the incentives to diversify are stronger for both the United States and China when the exporters are nondemocratic, import sanctions have opposite effects on oil imports into the United States and China. Finally, we document that there is no such oil import pattern in other non-major power oil importing countries.

Keywords: Energy Security, International Relations, Oil Trade Diversification

JEL Classification: F13, F51, F59, Q34

Suggested Citation

Research, Hong Kong Institute for Monetary and Financial, Geopolitics, Global Patterns of Oil Trade, and China’s Oil Security Quest (October 26, 2011). Hong Kong Institute for Monetary and Financial Research (HKIMR) Research Paper WP No. 32/2011, Available at SSRN: https://ssrn.com/abstract=1949670 or http://dx.doi.org/10.2139/ssrn.1949670

Hong Kong Institute for Monetary and Financial Research (Contact Author)

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