TThe cities that are the bulwark of China’s energy security, in times of global crisis, can appear deceptively quiet. Oil trucks ply the open roads with little traffic, while a few quaint shops in dilapidated buildings give a hint of a long-forgotten local vibe.
The ramshackle noodle shop serving hand-pulled noodles was empty at lunchtime, except for a few construction workers and a teacher watching videos on Douyin, a social media platform, about his meal.
But its manager was not worried about the footfall. He said the peak time was around midnight, when nearby oil refineries finished their shifts and stormed out of the nearby factory buildings, which employ thousands of people.
The oil refining industry in Shandong, a province in northeastern China, is huge. But unlike other parts of the country, where the sector is dominated by large, state-owned companies, Shandong’s industry is fueled by independent “teapot” competitions, so called because of their limited visibility. Operating in thinly veiled areas, they survive by buying raw materials wherever they can and turning them into petrol and diesel for neighboring provinces. Shandong teapots account for about a quarter of China’s refining capacity.
Oil refining has become important to China’s economy as the world, and in Asia in particular, comes out of the energy crisis with schools closed in Pakistan, a state of emergency declared in the Philippines and oil prices soaring.
Oil represents less than a fifth of China’s energy mix. But it is still important for the economy, especially the transport sector. Shandong teapots, in cities like Weifang, are now essential to keeping China’s economy stable.
The tragedy was caused by the US-Israeli attack on Iran on February 28, which caused chaos in the Middle East and prompted Tehran to close the Strait of Hormuz, an important waterway through which about a fifth of the world’s oil and gas flows.
But one type of oil continues to cross the oceans: Iranian. It goes mainly to China, which buys more than 80% of Iran’s oil. Figures from Kpler, a data intelligence company, show that China’s exports to Iran are running at around 1.6m barrels per day, compared to 1.4m barrels per day in 2025. Muyu Xu, senior oil analyst at Kpler, said: “We don’t see any disruption to Iranian oil.”
Chinese government officials are wary of buying Iranian oil because they do not want to be excluded from the international financial system based on the US dollar. But teapots, which cater to the local market, have no such doubts.
Erica Downs, a senior research fellow at the Center for Global Energy Policy at Columbia University, said: “The Trump administration authorized a few teapots … but that did not change the flow of Iranian barrels to China.
The manager of a small gas station in Weifang, a stocky man in his 70s who asked to be known only as Uncle Wang, said local supplies of diesel and gasoline have been stable since the start of the war, although rising prices have reduced his profits to “almost zero”.
“It’s not that [other countries] they can’t find oil, that is they are too afraid to buy it because [Donald] Trump won’t let them. But China is not afraid of him,” said Uncle Wang, holding court in his office behind his dusty gas station.” In the corner, there is a larger image of a frog biting a gold coin, a symbol of success.
But now that the rest of the world is hungry for oil – and the US has eased sanctions on Iran and Russia – Shandong teapots are paying a lot for their raw materials. According to data from Kpler, Iranian crude was about $11 a barrel cheaper than Brent crude before the US-Israeli attack. The discount has since dropped to less than $2 a barrel, at a time when Brent prices have risen.
An employee of one of Shandong’s prominent teapots said he was beginning to fear the outcome of the war. “Before the war, profits were good. After the war started, because crude oil prices went up a lot… consumers started buying less,” said the 22-year-old, whose name the Guardian has not used to protect his identity.
He works on the Luqing Petrochemical production line, turning crude oil into lightweight plastics used in everyday goods such as shopping bags. “These big trucks used to come here to pick up the goods,” he said, referring to the delivery trucks honking in the distance, “but now they don’t come as often, so the wages are down.” He expects his monthly salary of 5,000 yuan (£545) to drop to around 4,000 yuan next month.
Luqing, which employs more than 2,700 people, is one of several Shandong teapots sanctioned by the US last year for allegedly buying millions of barrels of Iranian oil. The worker said that in recent months the company has started pressuring people to quit their jobs by cutting their wages and moving them to places where there is more work. He fears that there may be more casualties if the fighting continues. “I’m very worried about that because the benefits and the treatment here are so good,” she said.
Luqing did not respond to a request for comment.
Shandong workers are at the forefront of the economic upheaval that many ordinary people in China are already locked into. On Monday, the government made an unusual intervention in the fuel market to reduce the planned increase in pump prices of petrol and diesel by almost 50%. Drivers flocked to fill their tanks before the cost went up.
But the teapot factories and the thousands of people they employ may not be able to withstand the pressure. If prices continue to increase, others may decrease.
And there are many other economic problems to worry about. Uncle Wang said: “The fight is temporary. The bigger threat to his oil business comes from a domestic culture, he said, not an international one: electric cars.”
Additional research by Lillian Yang
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