With the United States consuming about 15 million barrels of oil per day (bopd), the country’s dependence on foreign oil has been a major policy concern for decades. Because much of the oil Americans consume is sourced from the Middle East and other volatile areas, in years past the nation has fallen victim to price shocks caused by situations beyond its control.

But hydraulic fracturing—otherwise known as fracking—has revitalized US oil production, which has surged by nearly 40 percent over the past three years alone. While that hasn’t caused a huge drop in US oil imports, Canada has also significantly increased its oil production in recent years and exports much of that increase to the US via pipelines.

As a result, US energy security concerns have diminished significantly over the past few years.

Energy-thirsty China is experiencing the opposite trend, which makes Global Investment Strategist’s Long-Term Portfolio holding China Petroleum & Chemical (NYSE: SNP), better known as Sinopec, a good play now.

Last week, the US Energy Information Agency released a report that showed China has finally passed the US as the world’s largest importer of oil.

China’s economy isn’t likely to continuing growing at double-digit annual rates, but its oil consumption is on an inexorable upward path. While it was only consuming a little more than 2 million bopd two decades ago, the country’s consumption is rapidly approaching 11 million bopd. By way of comparison, the US consumes about 15 million bopd.

A major driver of that consumption in China is the deeper penetration of automobiles. As incomes rise, households begin devoting their increased discretionary income on more consumer goods such as diapers, convenience foods and electronics. While that phenomenon occurs at around $5,000 of annual income, when incomes begin reaching $10,000 the pace of automobile purchases begins rising exponentially.

The percentage of the Chinese population that owns automobiles isn’t likely to reach American levels any time soon, but auto sales in the Middle Kingdom have been surging in recent years, shooting up 21 percent in September on a year-over-year basis to 1.59 million units. In the first nine months of this year, 15.9 million vehicles had been sold in China.

Considering the huge size of the Chinese market, even small boosts in average household incomes produce big increases in auto sales, driving continued growth in oil demand.

That’s forcing China to look further afield for access to crude oil, particularly as its own domestic production has been flat to falling in recent years, driving it into the arms of more marginal countries. Earlier this week, the Iraqi Deputy Prime Minister for Energy told the press that China is interested in increasing its purchases of Iraqi oil by 70 percent to about 850,000 bopd.

Chinese energy firms are also pushing to expand into developed markets such as the US and Canada, though those deals are more about gaining access to technology rather than actual oil supplies. While there are still export restrictions on much of that technology, it will eventually be used to overcome China’s sagging domestic production.

Given the structural trends in place, it doesn’t make much sense to bet against the Chinese oil industry even as economic growth slows and consumer spending flattens out, at least for the time being.

That’s particularly true of China’s big three national oil companies, especially Sinopec, which produces more than 50 percent of China’s distillates and imports about 80 percent of its crude oil. As a result, many of the import deals being struck by the Chinese government are more or less intended for Sinopec and it has been making large investments in building capacity to refine lower grades of imported crude.

Sinopec is by far the largest among the few firms that hold licenses for exploration and production activities in China. Not only will it benefit over the short term from the government’s import deals, but over the long haul it will rack up gains as the country’s production capability improves along with technology.

We’ll continue to hear about China’s slowing economy and consumer plays in the country will become riskier, but enough structural trends are in place to continue driving oil consumption in this vast nation, even as its growth strategy continues to evolve.

China Petroleum & Chemical is a buy up to 125.

Portfolio Updates

Keppel Corp (OTC: KPELY) has announced that its third-quarter net profit was up 32 percent versus last year in the third quarter, hitting SGD457.6 million, even as revenues fell 8.4 percent to SGD2.95 billion.

The company’s offshore and marine division completed a reduced volume of rigs and other work, which significantly dented revenue, but sales in the property division were up SGD315 million, thanks to a strengthening Chinese market. Those higher margin property sales, along with cost control measures, helped boost profits.

Marine and offshore results are set to improve in the coming quarters, with SGD4.8 billion in new orders secured so far this year and deliveries extending into 2019. Keppel will also continue to benefit from Mexico’s steps towards allowing greater private and foreign investment in its energy properties, particularly those in the Gulf of Mexico, where the company is currently developing a new production yard.

Continue buying Keppel Corp up to USD20.

Despite a drop in smartphone chip sales and a forecast that fourth quarter revenues are likely to decline by as much as 10 percent in US dollar terms, shares of Taiwan Semiconductor (NYSE: TSM) are up today after the company reported that net income rose 5.2 percent in the third quarter.

The fact that net profit for the quarter hit a new all-time high of USD1.8 billion has driven much of those gains, up 0.3 percent on a sequential basis, with gross margin of 48.5 percent.

Management expects fourth-quarter sales to come in between TWD144 billion and TWD147 billion. However, despite this weak quarterly forecast, Chairman and CEO Morris Chang said that he expects full-year sales growth of about 18 percent. While Morris didn’t provide a specific forecast for 2014, he was particularly upbeat about next year’s growth prospects, as the company rolls out its new 20 nanometer chips.

Chang also said he still plans to step down as CEO by June 2014, but will remain as chairman. His successor has yet to be announced.

Taiwan Semiconductor remains a buy up to 20.