The evolution of the international energy order has undergone four stages: the first stage is from the Industrial Revolution, when humans learned to use coal, oil and other fossil fuels, to the late 19th century, which can be regarded as its infancy period; the second stage is from the beginning of the 20th century to the early 1970s, which is dominated by Western multinational oil companies; the third stage is from the late 1970s to the end of the 20th century, which is characterized by the competing coexistence of oil-producing states and oil-consuming states; the fourth stage is from the beginning of the 21st century through now, which is a transitional period to a new international energy order.

On October 24, 2012, “Energy Development Policies and Objectives”, Part II of China’s Energy Policy 2012 – white paper issued by China’s State Council Information Office, for the first time puts forward the need to “promote the establishment of a new international energy order.”[①] Hence, what has happened in the international energy order? What are the functions of contemporary international law in the transformation of the international energy order? What should China do in this transitional period? All these questions are of practical significance to China’s energy security. This paper consists of four parts including an introduction: Part I analyzes the new changes in the international energy order; Part II prospects the trends of development of the international energy order; Part III probes into the functions of international law in the transition to a new international energy order; Part IV redefines China’s role in establishing a new international energy order.

I. New Changes in the International Energy Order
In recent years, the international energy order features the following changes:

1.1 Shift of world’s energy production center.

Since World War II, the Middle East became the center of world’s energy production. However, with the progress of exploration and technology, “The outline of a new world oil map is emerging, and it is centered not on the Middle East but on the Western Hemisphere”[②], including shale oil in America, oil sands in Canada, offshore oil in Central America, and pre-salt oil in Brazil. The International Energy Agency (IEA) pointed out in its World Energy Outlook 2012 that, as far as the state-of-art technology is concerned, the world’s most abundant recoverable reserves of petroleum resources is not in the Middle East (1.2 trillion barrels), but in North America (2.2 trillion barrels, of which 1.9 trillion barrels are non-conventional energy resources). Take the United States as an example, driven by upstream technologies that are unlocking light tight oil and shale gas resources, its unconventional oil and gas resources including shale oil and shale gas, exploited with a hydraulic fracturing method, will improve its liquid fuel production to 11.4 million barrels per day in 2013, ranking only second to Saudi’s 11.6 million barrels per day; by 2017 the United States will overtake Saudi Arabia as the largest oil producer; by 2030 the United States will become a net oil exporter; by 2035 the United States will achieve energy self-sufficiency.[③] In addition, by 2015, the United States will surpass Russia to become the world’s largest natural gas producer.[④] According to the US Energy Information Administration (USEIA), its 10.13 million barrels daily oil production was ranked third in the world in 2011 (after Saudi’s 11.15 million barrels and Russia’s 10.22 million barrels). In 2012, it surged 7% to 10.9 million barrels daily.[⑤]As the U.S. energy economist Daniel Yergin has anticipated: “The new energy axis runs from Alberta, Canada, down through North Dakota and South Texas, past a major new discovery off the coast of French Guyana to huge offshore oil deposits found near Brazil.”[⑥]

1.2 Shift of world oil consumption markets.

“Energy demand barely rises in OECD countries, although there is a pronounced shift away from oil, coal (and, in some countries, nuclear) towards natural gas and renewables.”[⑦] With the westward shift of the world’s energy production center, the energy consumption center is also shifting from developed countries to the Asia-Pacific region, especially to China and India. “This accelerates the switch in direction of international oil trade towards Asia, putting a focus on the security of the strategic routes that bring Middle East oil to Asian markets.”[⑧] In the last 20 years, the rapid economic development in this region has demanded increasing oil and gas supplies. The Asia-Pacific region’s oil demand has increased from 10% to 25% of the world’s total oil consumption. Take China as an example, its oil import from Saudi Arabia in December 2009 reached a record high level of 1.2 million barrels per day; while at the same term, Saudi’s crude oil export to the United States, the most important export market of Saudi Arabia, dropped below 1 million barrels per day for the first time in 20 years.[⑨] China has replaced the U.S. as Saudi Arabia’s largest oil importer.[⑩] In addition, the IEA also predicts that, from now to 2035, global energy demands will grow by more than 1/3, 60% of which will come from China, India, and the Middle East, with India replacing Japan in 2020 to become the world’s third largest oil importer;

1.3 Rapid growth of new energy.

Given the shortage of traditional fossil energy, environmental deterioration, and the urgency to address climate change, new energy growth has gained increasing momentum in recent years. 119 countries had made renewable energy development goals or stimulus plans by 2011.[11] It’s worth mentioning that the oil-producing countries in the Middle East have also begun to pursue energy diversification with vigorous efforts on new energy. For example, the UAE government launched “MASDAR Action Plan” and “Integrated Energy Strategy 2030” in 2006 to increase its inputs in the infrastructure construction, education, scientific research and technological development of new energy industry, and it’s anticipated that Dubai would achieve the conversion from fossil fuel energy to ecological energy in 2030.[12] It should be noted that, although Barack Obama and Mitt Romney proposed different energy policies in the U.S. presidential election debate in October 2012, they both claimed that the United States needed energy independence. Obama’s policy philosophy was to develop clean energy, for which he had approved $90 billion’s worth of investment to stimulate the development of new energy and limit or even ban highly polluting coals. This is a real green revolution: in his first term, wind power generating capacity doubled, and solar capacity increased six-fold.[13]

1.4 Reduction of OPEC’s influence.

Established in 1960, the Organization of the Petroleum Exporting Countries (OPEC) was the most influential organization of oil-producing countries. OPEC has dominated the international oil market for more than 50 years. However, due to the expansion of non-OPEC oil-producing countries including Russia and Kazakhstan in the world oil market, as well as its inefficient coordination, OPEC’s control of international oil price has been greatly weakened. According to IEA’s statistics, OPEC accounted for 55.5% of world oil production in 1973, but dropped to 42% in 2012. In addition, the oil production of non-OPEC countries will increase in a sustainable manner: because of the growth of unconventional energy, especially the rapidly increasing production of American light tight oil and Canadian oil sands as well as Brazilian deepwater oil, non-OPEC oil production will increase from less than 49 million barrels per day in 2011 to more than 53 million barrels per day in 2015, which will last until the mid-2020s, and then fall to 50 million barrels per day in 2035.[14]

1.5 Complexity and volatility of international energy market.

First of all, endless geopolitical competitions for energy will increase the turbulences of international energy market. On the one hand, the chaos and instability in African and Middle Eastern countries such as Libya, Syria, Iraq and Iran have an adverse effect on international energy market. On the other hand, the disputes over the transit of Russian Natural Gas on the Territory of Ukraine, the friction over the energy transit in the Persian Gulf, as well as the oil and gas dispute between Sudan and South Sudan, etc., are potential dangers to international energy market. Second, driven by the new round of nationalization wave, national oil companies have undergone a rapid development. Consequently, the monopoly of oil-producing countries on domestic oil markets have been gradually strengthened. Statistics indicate that 85% (excluding China) of the world’s proven oil and gas reserves in the 20th century were controlled in the hands of large multinational oil companies; except 14% controlled by the former Soviet Union, only 1% of the total energy was directly controlled by relative countries; however, the 40 countries with the largest oil reserves have gained 55% of their total governmental revenue in their energy cooperation with foreign countries in 2002, and up to 85% in 2007.[15] Third, with the diversification of energy market subjects, oil financial derivatives market has become an integral part of international oil market.

1.6 Adjustment of energy strategies.

Major countries and regions have accelerated their steps to adjust their energy strategies to meet the growing energy demands, address climate change and adapt to the changing energy pattern. For example, the United States issued a blueprint for its future energy security, launched the “Green” and “New” energy policy. Meanwhile the US House of Representatives passed American Clean Energy and Security Act 2009. Britain unveiled in succession The UK Low Carbon Transition Plan: National Strategy for Climate and Energy 2009, UK Renewable Energy Strategy 2009 and UK Energy Act 2010. The European Parliament adopted the EU Third Energy Reform Plan (which included three regulations and two directives) in 2009; the European Commission also released in succession “Energy 2020 - A Strategy for Competitive, Sustainable and Secure Energy”[16] in November 2010 and “Energy Roadmap 2050”[17] in December 2011. Japan published “Strategic Energy Plan of Japan” in 2010, etc., which have attracted worldwide attention.

II. Developing Trends of the International Energy Order
Based on the above changes, the international energy order has shown the following trends:

2.1 The Arctic region and the international seabed area will become new energy sources.

Energy resources in the Arctic are abundant. It is estimated that their potential recoverable oil reserves are 100 - 200 billion barrels,[18] natural gas reserves are 50-80 trillion cubic meters, hence the designation of “the Middle East at the end of the earth”[19]. That’s why in recent years many countries are invariably turning their eyes to the North Pole. For example, in September 2007, Britain claimed sovereignty over the continental shelf of the Atlantic Ocean near the North Pole, trying to get energy exploitation rights near the disputed Rockall Island, which is disputed by Britain, Ireland, Denmark and Iceland. In 2009 Russia developed “Russian Federation’s Policy for the Arctic to 2020”; in 2010 the Russian Security Council introduced Arctic Strategy, announcing the Arctic will become Russia’s strategic energy base in 2016.[20] Furthermore, the United States, France, Germany, Denmark, Sweden, Canada and other countries have already carried out expeditions in the Arctic, and strengthened their presence in the Arctic. It is thus clear that the resource competition in the Arctic has been geared up.

The International Seabed Area (hereinafter “Area”), accounting for about 65% of marine area, is rich in energy resources, such as methane hydrates (combustible ice), etc.[21] It’s not until recent years that resource explorations and development activities in “Area” have been put on agenda. First, the International Seabed Authority adopted the “Regulations on Prospecting and Exploration for Polymetallic Nodules in the Area”[22] in 2000 and “Regulations for Prospecting and Exploration for Polymetallic Sulphides”[23] in 2010. These two regulations have paved the way for the relevant prospecting and exploration of resources. Meanwhile, the International Seabed Authority has signed polymetallic nodules exploration contracts with 8 contractors including the China Ocean Mineral Resources Research and Development Association (COMRA), and approved two applications of polymetallic nodules exploration made by Nauru Ocean Resources Inc. and Tonga Offshore Mining co., LTD, and two applications of polymetallic sulphides exploration made by COMRA and Russian Federation Ministry of Natural Resources and Environment Ministry.[24] Second, the Legal and Technical Commission of the International Seabed Authority drafted “Regulations on prospecting and exploration for cobalt-rich ferromanganese crusts in the Area”[25], and submitted it to the Council for approval in 2009, which was adopted by the 18th session of the International Seabed Authority in July 2012.[26] Besides, the International Seabed Authority has also decided to start the preparatory work to draft mining regulations. Third, in February 2011 the Seabed Disputes Chamber of International Tribunal for the Law of the Sea delivered its advisory opinion on “Responsibilities and Obligations of States Sponsoring Persons and Entities with Respect to Activities in the Area”[27], which will promote the resource exploration and development in the Area, and provide a legal basis for International Seabed Authority and sponsoring states to take their responsibilities.[28]

2.2 The exploitation of unconventional energy will become a new direction.

The concept of unconventional energy corresponds to conventional energy, or traditional energy, which refers to “energy which has been produced on a large-scale and has been utilized widely in a long historical period and with certain conditions of science and technologies, such as coal, oil and natural gas”[29]. The potential reserves of unconventional energy can be huge. According to statistics, the geological reserves of extra-heavy oil in the world are 294.5 billion tons; geological reserves of oil sands are 456 billion tons; geological reserves of shale oil are about 689.3 billion tons; coal bed gas reserves are 260 trillion cubic meters; shale gas resources are 419 trillion cubic meters, and methane hydrate reserves may be 3,000 trillion cubic meters.[30] Also, some scholars estimate that there are 6 trillion barrels of oil in oil shale and oil sands, which is twice as much as the proven oil reserve.[31] Shale oil and oil sands are located in North America. It can be expected that with scientific advances and technology breakthroughs, production of unconventional energy, such as oil sands in Canada, extra-heavy oil in Venezuela, shale oil and gas in U.S. as well as the methane hydrate in international seabed area, will increase by a large margin, thus playing a substantial role in future energy supply.

2.3 Climate change and low-carbonization will become a new agenda for energy.

British scholar Anthony Giddens pointed out in his Politics of Climate Change that tackling climate change issues would become the main topic in regional and global arena in the coming 20 years.[32] It is acknowledged that the rising level of carbon dioxide and other greenhouse gases is extremely hard to stop, which requires the international community to take strong measures to curb this trend. The international community has reached consensus in this regard: “Copenhagen Accord”, “Cancun Agreements”, the launch of Green Climate Fund after the World Climate Conference in Durban, and a package resolution including the second commitment period of Kyoto Protocol adopted in the Doha Conference on Climate Change in December 2012, etc. Therefore, low-carbon economy and low-carbon energy have become a worldwide trend. Since low-carbon economy is founded on the low-carbonization in energy production and consumption, it is dominating the development of energy technology in the world. In fact, the developed countries have integrated low-carbonization of energy into their new round of energy strategy adjustment, “whose energy legislations also show the characteristics of low-carbonization”[33]. For example, the “Low-carbon Investment Promotion Law” adopted by Japan’s House of Representatives and Senate in May 2010 was an important legal support for Japan to build a low-carbon society. Since July 2012, Japan has begun to operate its “Total Amount of Renewable Energy Power Purchase System (FIT)”[34]. It is thus clear that climate change mitigation and the transition to a low-carbon economy will produce changes in rules, systems and regulations of the international energy order. Low-carbon energy is a basic guarantee of a low-carbon economy; clean production is the key to a low carbon economy; recycling is an effective method for a low-carbon economy; and sustainable development is the future direction of a low-carbon economy.

2.4 The rule-making right in energy market will become a new battlefield.

First, some oil-producing countries and consuming countries have established their own petroleum exchange to compete for international discourse power in the oil market. Currently there are two international pricing systems for crude oil: one is the trading price of Brent crude oil in the London International Petroleum Exchange; the other is the WTI (West Texas Inter-medium) pricing in NYMEX Exchange, USA.[35] In order to protect their own interest, some countries have joined the battle for the oil pricing right. The India MCX listed crude oil futures in 2002, and the Iranian Oil Futures Exchange opened in 2008. In addition, the UAE in cooperation with the New York Mercantile Exchange has established the Dubai Mercantile Exchange (DME). Also, Russia has been making preparations for its crude oil futures exchange.

Second, investment funds have gradually become the main force to manipulate the oil market. With the fluctuations of the international oil price, banks, hedge funds, pension funds, social security funds and other types of investment funds, have invested in the oil futures market, and have in consequence controlled the oil pricing right, which has traditionally been dominated by the international oil industry. “Oil futures and options have developed into a new type of financial investment vehicle from a hedging instrument.”[36]

Third, the competition between developed countries and emerging economies for the rule-making right of new energy has become increasingly intensified. As mentioned above, they have been contending for the commanding height on new energy. On the basis of their advanced technology of new energy, developed countries have taken the leading position in international new energy market by dominating the rule-making authority of world energy sector, which further consolidates their international status and influence. On the other end of the spectrum, “emerging economies like China and India have built up their competitive advantages in some specific areas of the new energy industry to compete with developed countries by virtue of their labor cost, huge market and late-starter, etc.”[37] Therefore, there will be more contentions over new energy, similar to the photovoltaic war between China and the United States and the European Union in the field of solar energy. At the same time, there will be more fierce competition in respect to the rule-making right including technology standards, trade rules and management systems.

2.5 Diversification will become a feature of the new energy order.

First of all, new energy will be more diverse. Nowadays we can make use of various types of energy, including traditional energy, like oil, gas, coal and other fossil fuels, and new energy, like solar, nuclear, biomass and other resources, and also unconventional energy, e.g., oil sands, shale oil, and methane hydrate. Undoubtedly, energy resources will be even more diverse in the future.

Second, the energy market will be diversified. On the one hand, with the establishment of oil futures exchanges in the United Arab Emirates, India, Iran, Japan, Russia and other countries, energy trading market has been diversified. On the other hand, the participants in the energy market have been diversified as well, with a reshuffle of their influential power: the power of multinational oil companies has been further compressed with their market controlling abilities declined; national oil companies have taken the dominant position after a new round of nationalization as rule-makers for international energy cooperation; meanwhile, investment funds have become a significant force in international oil market.

Finally, the energy pattern will be diversified. The United States and the European Union will maintain its advantages in the energy sector and control the rule-making right of the international energy order; China, India and other emerging economies, with their growing economic strength, especially their rising status in the energy consumption market, will present their demands in the transition to a new international energy order. Therefore, the bi-polar international energy pattern of oil-producing and consuming countries will be diversified into a multi-polar pattern.

III. Functions of Contemporary International Law in the Transition to a New International Order
International law as a regulator of international relations has a wide range of social functions. Based on the coordinated will or consent of states, international law regulates states’ actions with limited mandatory norms. It’s indispensable for the transition to a new international energy order,[38] since contemporary international law plays an important role in promoting, regulating and safeguarding the international energy order transformation.

3.1 International organizations provide platforms for international energy cooperation.

International organizations are important subjects of international law, meanwhile its operating mechanisms and resolutions are also basic content of contemporary international law. Most importantly, international organizations, such as the UN, the IEA, IAEA, OPEC, the Arab Petroleum Exporting Countries, the International Energy Forum, “G8” Summit, the Asia-Pacific Economic Cooperation Organization, the World Petroleum Congress and the World Energy Council, etc., have provided a platform for international energy cooperation. It’s worth mentioning that the Energy Charter Conference (EEC), with its aim to facilitate dialogues and cooperation between energy producing and consuming states, has provided a common platform to develop and implement binding rules for all energy stakeholders.[39]

UN-Energy, the interagency mechanism on energy, was established in 2004 to ensure coherence in the UN system’s multi-disciplinary response and effective engagement on energy-related issues, with the aim to promote system-wide collaboration in the area of energy with a coherent and consistent approach since there is no single entity in the UN system that has primary responsibility for energy.[40] UN-Energy has created an international platform to jointly handle international energy issues with substantive and collaborative actions both in regard to energy policy development and implementation, as well as in maintaining an overview of major ongoing initiatives within the system.[41] In recent years, UN-Energy has issued several energy-related reports, including “The Energy Challenges of Achieving Millennium Development Goals” and “United Nations Energy Situation: The General Mechanism for Activities”. At the same time they initiated many action plans, such as “Promotion of New Energy and Renewable Energy(A/RES/62/197)”, “Renewable Energy and Energy Efficiency: EU's Southern and Eastern Neighbors' Innovative Policies and Financing Instruments”(E/CN.17 / 2007/11), “Main Groups Priority Action in Energy for Sustainable Development, Industrial Development, Air Pollution/Atmosphere and Climate Change” (E/CN.17/2007/7) and “Promotion of New Energy and Renewable Energy, Including The Implementation of the World Solar Programme” (A/RES/60/199), etc. All these efforts have provided a strong impetus to international energy cooperation.[42]

3.2 Contemporary international law provides basic legal norms for international energy cooperation and transition to a new international energy order.

As mentioned above, “Regulations on Prospecting and Exploration for Polymetallic Nodules” and “Regulations on Prospecting and Exploration for Polymetallic Sulphides”, adopted by the International Seabed Authority respectively in 2000 and 2010, have provided detailed provisions on terminology, scope, prospecting, exploration plan application, exploration contract, protection and preservation of the marine environment, confidentiality, etc., thus laying a solid legal basis for all parties to conduct relevant prospecting and exploration activities in the Area. In addition, the draft “Regulations on Prospecting and Exploration for Cobalt-rich Ferromanganese Crusts in the Area” and “Exploitation Regulations” will also provide legal norms on the exploration and development of cobalt-rich ferromanganese crusts resources in the Area. For example, the Energy Charter Treaty, founded on the fundamental principles of non-discrimination, transparency and a commitment to the progressive liberalisation of international trade, has laid down provisions on energy investment, energy trade and energy transit. It has also developed well-acknowledged goals and standards necessary for energy-related environmental protection, thus creating a level playing field of international energy rules to be observed by all participating governments.[43]

In addition, relevant international treaties, the UN General Assembly resolutions and international judicial decisions have confirmed a state’s permanent sovereignty over natural resources, thus providing a legal foundation for the state to strengthen their control and management of its natural resources. Article 56 of the United Nations Convention of Law of Sea, specifically provides that the coastal state has “sovereign rights for the purpose of exploring and exploiting, conserving and managing the natural resources of the waters superjacent to the sea-bed and of the sea-bed and its subsoil, and with regard to other activities for the economic exploitation and exploration of the exclusive economic zone(EEZ) , such as the production of energy from the water, currents and winds”; “Declaration of permanent sovereignty over natural resources”, adopted by the UN General Assembly in 1962, has declared “The right of peoples and nations to permanent sovereignty over natural wealth and resources” is a basic element of self-determination and also provided the right to nationalization of their resources; the tribunal in Kuwait v. Aminoil award reached a conclusion in 1982 that, since a large number of constitutions have claimed all natural resources as national property, Kuwait enjoys full ownership of oil resources which could be placed under its domestic jurisdiction.[44]

3.3 Contemporary international law provides settlement mechanisms for international energy dispute.

International lawyers divide international disputes settlement mechanisms into two categories: “peaceful means” and “non-peaceful or compulsory means”[45].  Peaceful means include political means (also known as diplomatic means) and legal means. The former consists of negotiation, good offices, mediation, conciliation, international investigation and resort to the United Nations; the latter consists of arbitration and judicial settlement. After World War II, settling disputes with peaceful means has become a fundamental principle of international law. Contemporary international law provides principles and methods for sovereign states and investors to settle various international energy disputes.

First, the principle of settling international disputes with peaceful means is not only a fundamental legal principle, but also a jus cogens norm. All international disputes, including international energy disputes, should be resolved with peaceful means. Moreover, “Pacific Settlement of Disputes”, Chapter 6 of “The UN Charter” provides for detailed procedures on peaceful settlements of international disputes. Second, contemporary international law is the legal basis for judicial organs to decide cases on international energy disputes. For example, the Preamble of “The UN Charter” emphasizes that “to ensure, by the acceptance of principles and the institution of methods, that armed force shall not be used”; Article 38 of “Statute of the International Court of Justice” clearly states: “The Court, whose function is to decide in accordance with international law such disputes as are submitted to it”. International law includes international conventions, international customs, the general principles of law, judicial decisions, the teachings of the most highly qualified publicists, resolutions of international organizations and so on. Third, some international conventions have provided special mechanisms to settle specific energy disputes. For example, “The Energy Charter Treaty” has special provisions for the settlement of disputes over trans-boundary energy pipelines, which set forth a specialized conciliation mechanism under the ECT besides conventional mechanisms, such as negotiation, consultation, arbitration and judicial settlement. The special conciliation mechanism is a unique settlement, which can play the role of a safety valve.[46]

3.4 Contemporary international law safeguards the new international energy order.

On the one hand, international legal documents have clearly defined a state’s obligation to abide by contemporary international law, which is the code of conduct for the whole international community. All states are equal before international law, and all states must comply with international law and fulfill its international obligations. For example, “The UN Charter” Preamble solemnly proclaims “to establish conditions under which justice and respect for the obligations arising from treaties and other sources of international law can be maintained”; Article 26 of The Vienna Convention on the Law of Treaties (1969) adopts the ancient principle of pacta sunt servanda: every treaty in force is binding upon the parties to it and must be performed by them in good faith”; meanwhile, “A party may not invoke the provisions of its internal law as justification for its failure to perform a treaty.” (Article 27)

On the other hand, these international legal mechanisms are more than external pressure for states to fulfill their international obligations; most importantly it’s the legal basis for the international community to impose sanctions against those states that have failed to fulfill their international obligations. For example, “Draft Articles on Prevention of Trans-boundary Harm from Hazardous Activities”, adopted by the International Law Commission in 2001, has confirmed a state’s responsibility and international liability arising from the trans-boundary harms caused by its hazardous activities. Therefore, every state must meet its obligations while enjoying its right under the new international energy order; otherwise, it shall accept liability for any damage or international sanctions.

IV. China’s Role in Transition to A New International Energy Order
In 2011, China’s primary energy production amounted to the equivalent of 3.18 billion tons of coal, the largest energy producer in the world.[47] However, China faces many challenges in its energy development: shortage of energy resources with low per capita volume of coal, petroleum and natural gas; rapid growth in energy consumption in recent years; increasing pressure on the security of energy supply; and more than 57% oil dependence on foreign states. For these reasons, it’s of significance for China to further strengthen international energy cooperation and promote the transition to a new international energy order, thus safeguarding its energy security. So it is particularly critical to redefine China’s role in this process.

4.1 To international energy rules: an active innovation instead of a passive recipient.

Due to various reasons China has always been a passive recipient of international rules with well-behaved performance, which is manifested in the fact that “the Chinese government tries to make their behaviors consistent with the international rules instead of advocating new rules or changing the decision-making mechanism behind them for its own sake”[48]. As the second largest oil consumer and importer in the world, China has been excluded from the international crude oil pricing mechanism. China imports crude oil at the price of Brent or West Texas Intermediate (WTI). China does not have pricing power in international crude oil market, so it can only passively accept the international oil prices. Wild fluctuations of the international oil price will not only bring tremendous market risks to Chinese petroleum and petrochemical companies, and end-users, but also will have an adverse impact on its social and economic development. Moreover, it will threaten China’s energy security. In consequence, China should make a long-term plan to actively participate in the international oil pricing mechanism, formulate its own oil quotation system, and increase its influence on international oil price. China should seize the “strategic opportunity of establishing crude oil pricing center in the Asia-Pacific region”[49]. Although there are the India Commodity Exchange, Dubai Mercantile Exchange and Tokyo Industry Commodity Exchange and so on, the crude oil futures market and the Asia-Pacific oil pricing center are still in their initial stages. Therefore, it’s a strategic opportunity for China to build up its own crude oil futures market and its international discourse power on energy.[50] In addition, China should make efforts to strengthen its coordination and cooperation with energy producing states, consuming states, and interest community in the multilateral international energy rule-making process and construct a new international energy order with its influence as a large energy consumer.

4.2 To international energy affairs: from an onlooker to an active participant.

For a long time, the Middle East was crucially important to American energy security. However, the United States has made a strategic shift from the Middle East to its domestic and American market to meet its oil demand. Instead, China’s energy demand has been increasingly dependent on the Middle East. Consequently, China needs the Middle East to be stable more than the United States does. Although China is still a latecomer, an onlooker and a passive player in international energy affairs for the time being, it’s urgent to put an end to the traditional diplomacy with an aloof detachment, and redefine its role as an active participant in international energy affairs. As one scholar has pointed out: “China’s international status and national interests make it difficult to detach itself from international affairs and stick to the principle of non-interference in each other’s internal affairs, so ‘protective intervention’ will become China’s inevitable choice to address this challenge.”[51]

4.3 To international public goods: from a receiver to a contributor.

According to IEA statistics, China consumed 2.252 billion tons of oil equivalents of energy in 2009, about 4 percent more than the United States did, becoming the world’s biggest energy consumer in that month.[52] However, the Chinese government rejected this assertion.[53] China’s unwillingness to accept the title of the world’s biggest energy consumer reflects China’s lack of confidence in its growing global influence, and mentality to undertake greater international responsibilities.[54] In fact, China’s GDP has surpassed Japan to become the world’s second largest economy in 2010.[55] The international community has expected China, as one of the five permanent members of the UN Security Council with growing economic strength, to play a bigger role in global governance, regional cooperation and international conflicts. Observing that China has a seat at virtually every table and a role in virtually every institution of importance in the world, former U.S. Secretary of State Hillary Clinton said that “China’s power, wealth, and influence have pushed China rapidly to a new echelon in the international order”, so the U.S. and “the world are looking for even greater leadership from China”.[56] Therefore, China is facing the task of transforming from a recipient to a provider of international public goods on energy. China should improve its international discourse power by actively participating in the development of new technology standards, trade rules and management systems on energy. True to one scholar, “China should understand that more power also means more responsibility, and it cannot expect greater influence without also assuming a part of the burden borne almost exclusively by the US in terms of providing public goods for the rest of the world.”[57] Great powers not only share prestige and influence, but also share the obligations to improve international security and general welfare.

In conclusion, dramatic changes of the international energy order have indicated the advent of a new international energy order. Meanwhile, in the face of these new challenges for its energy security, China should make full use of its growing global status to seize this historical opportunity and contribute more “Chinese Initiatives” and “Chinese Solutions” to accelerate the transition to a new international energy order.

Source of documents：Global Review