Oil is an important strategic resource for national security, but its development and utilization are restricted by water resources at present. Some studies have measured the water resource use of oil development and utilization through water footprint and virtual water, but they cannot fully reflect the water resource vulnerability of oil development and utilization. Based on the input-output analysis method and water resources pressure, this study develops the scarce water footprint assessment model and virtual scarce water trade estimation model. These models are used to analyze the consumption of scarce water resources and the driving of virtual scarce water trade by regional oil development and utilization in China. The results show that incorporating regional water resources pressure into water use assessment can better reflect the water resources constraints of China’s regional oil development and utilization. For Ningxia Hui Autonomous Region, the amount of water resources used in oil development and utilization is not large, but it faces serious water scarcity problems on account of water pressure. Especially, oil, coking products, and nuclear fuel processing products of Ningxia Hui Autonomous Region are faced with greater pressure of water shortage. To effectively mitigate the water resource vulnerability faced by the above regions in oil development and utilization, it is necessary to identify and manage critical virtual scarce water flows at the regional and sectoral levels. From the results at the regional level, it is necessary to focus on the transfer of virtual scarce water from net outflow areas of virtual scarce water such as Xinjiang Uygur Autonomous Region and Heilongjiang Province to net inflow areas of virtual scarce water such as Zhejiang Province and Liaoning Province in oil development and utilization. From the sector-level results, there is a need to focus on the diversion of virtual scarce water from the energy sector and agriculture to oil, coking, and nuclear fuel processing products. To effectively alleviate the pressure of water resources in oil development and utilization, this study calls for the establishment of an efficient and collaborative water resources management mechanism, and the inclusion of water scarcity as a core consideration in regional oil development and utilization strategic planning. At the same time, strengthen the cross-sectoral cooperation between the energy sector and the water resources management sector, scientifically plan the layout and scale of exploitation, and ensure that oil development activities do not harm water resources security. In addition, the sustainable development and utilization of China's oil resources are promoted through regional allocation of virtual scarce water, the promotion of water-saving and recycling technology of water resources.