By all accounts China’s industrial growth is slowing down. GDP only grew 6.9% in 2015, the weakest growth in 25 years. Industrial output rose less than 6%. Slower growth should indicate a corresponding deceleration in energy use, particularly petroleum. But, in fact, China’s petroleum purchases are increasing. Overall, Chinese demand for oil grew 1.5% in 2015, and in December, 2015, the Chinese imported more crude oil than ever before. China National Petroleum Corp. (CNPC) even forecasts continued demand growth in 2016. The question, is why?

One possibility is that overall transportation is rising in China. As China transitions from an industrial-manufacturing based economy to a consumer based economy, citizens begin to travel more. Indications are that Chinese citizens are viewing car purchases more favorably, and the Chinese government is offering tax breaks that seem to be encouraging individual car purchases. An increase in car ownership translates to an increase in gasoline demand, which the Chinese could be preparing for with increased crude oil imports.

Another possibility could be the abnormally cold winter that China is experiencing this year. It is possible that the Chinese are using the fuel in a heating capacity.

The most likely two causes of China’s increased oil demand, however, are the 5.3% jump in refining output and crude oil storage. Chinese refineries, particularly independent refineries known as “teapots,” accounted for part of the increase in crude oil imports in 2015, as the Chinese government recently allowed these refineries to purchase crude oil on the global market rather than through government contracts. It seems as though the majority of these refined products are exported rather than used domestically.

In addition, China has been actively increasing its stockpiles of crude oil. According to Chinese officials, China has more than doubled its crude oil stockpiles in the past year and is in the process of building more storage facilities to again double that amount by 2020. Whether China is preparing to meet future military demands or simply stocking up when prices are low in anticipation of greater consumer demand in the future is still unknown.

What do you think the Chinese are doing with all that oil? And if they are storing it, is it for a rainy day or something in particular? Submit your thoughts.