With the United States poised to step up naval patrols within disputed maritime borders of the South China Sea, energy analysts are downplaying worries about potential clashes with China over a waterway that sees one-third of the world's waterborne traded oil passing through its shipping lanes.
The 15 million barrels of oil transported daily through the Malacca Strait and South China Sea en route to East Asia are triple the amount that moves through the Suez Canal and more than five times the tonnage that transits the Panama Canal.
The volume of shipping through the sea's waters has skyrocketed as China and ASEAN nations increased international trade and oil imports. China and Japan by themselves rank as two of the top five consumers and importers of oil in the world.
"Any increased rhetoric caused by U.S. warship [maneuvers] should not affect the region's underlying energy markets," said Matt Smith, an analyst at ClipperData, which tracks global flows of waterborne crude oil.
"China imports 5.5 million barrels of waterborne oil per day, the vast majority through the South China Sea," Smith said. "That's 50 percent of China's daily consumption. They need those oil flows to continue."
US Navy
Reports suggest that within days the U.S. Navy could sail warships inside the 22-kilometer territorial zones around the artificial islands China is building in the disputed Spratly archipelago. Beijing considers these areas a legitimate extension of its territory.
U.S. Defense Secretary Ash Carter, who has called on Beijing to stop the construction, this week insisted the U.S. will "fly, sail and operate wherever international law allows," noting that the South China Sea is not an exception to that policy.
China's Foreign Ministry has warned against engaging in "provocative behavior" in the South China Sea, and vowed it will "never allow any country to violate" its territorial waters or airspace.
Swaths of the South China Sea are also claimed by the Philippines, Vietnam, Taiwan, Brunei and Malaysia.
Beneath its floor, the waterway holds proven oil and natural gas deposits of significant importance to these smaller nations at odds with Beijing. The reserves also represent energy security for China's large, growing economy.
But it's the nearly 30 percent of global maritime trade traversing the sea's vital shipping lanes that greases so many economic wheels.
Heated rhetoric
These shared interests are why, despite the heated rhetoric, the potential to disrupt global oil flows is small and there have been no changes in shipping patterns or orders thus far, energy analysts say.
"China's basic strategy is push, push, but don't break," said David Rosenberg, professor of political science at Middlebury College. "China will increase pressure but not disrupt the oil or container trade that's a vital part of its existence.
"For their part, the U.S. and Japan have taken clear steps to assert freedom of the seas, and it's very important they do this," Rosenberg added.
Eight out of 10 of the world’s busiest container ports are located in the Indian Ocean, the South China Sea and East China Sea region. But it's other global hot spots that worry oil traders more.
"[The South China Sea issue] really hasn't attracted much attention and it's not going to trigger much of an oil price response, certainly not in the coming months," said Jim Ritterbusch, president of Ritterbusch and Associates, a Chicago-based oil trading advisory firm.
"So far, it's an isolated issue that's been overshadowed by the military havoc in the Middle East," Ritterbusch said.
