Get your free personalized podcast brief
We scan new podcasts and send you the top 5 insights daily.
Despite the US-Iran conflict, which should cause oil prices to skyrocket, they remain relatively stable. This is because China's massive internal housing crisis has suppressed its energy demand, creating a bizarre economic check on a war that would otherwise be untenable for the US due to soaring energy costs.
Related Insights
China countered the Iran oil crisis by shifting 1.4M barrels/day of demand to EVs and cutting overall demand by 3-4M barrels/day. This move stabilized prices, demonstrated immense control over its energy consumption, and showcased its green tech dominance as a foreign policy tool.
Despite energy shocks, global oil prices have been partly contained because China has significantly reduced its imports. By drawing from its large, previously amassed stockpiles, China is inadvertently acting as a stabilizing force, absorbing some of the market pressure.
The primary reason oil prices didn't surge into the triple digits was China's remarkable ability to adapt. By massively reducing crude imports and switching to other sources like coal while accelerating EV adoption, China single-handedly absorbed a significant portion of the global supply shock.
China blunted the U.S. strategy by anticipating the Hormuz closure and cutting its oil imports by 6 million barrels per day when prices spiked above $170. This massive, rapid reduction in demand stabilized global prices and demonstrated China's ability to manage energy shocks, undermining the U.S. show of force.
Analyst Doomberg theorizes that the mystery of low oil prices amid Mideast conflict is due to China. Last year, China likely bought enormous amounts of sanctioned oil, lied about its reserve levels, and is now discreetly selling it into the market to keep prices stable and increase its geopolitical leverage.
China's drastic cut in oil imports was not caused by the war. Demand was already collapsing from a domestic property crisis. The conflict provided a convenient public explanation for Beijing to stop propping up import figures used to hide its economic weakness.
Widespread predictions of $150 oil failed to materialize during the recent Iran war, largely because China drew down its own substantial oil reserves. This self-interested move, enabled by a multi-year reserve buildup, had the unintended consequence of accommodating US interests and preventing a global price spike.
The oil market's long-term futures predict deflation, seeing a global slowdown and China's housing crisis as bigger economic forces than short-term, conflict-driven price spikes.
Analysts expected SPR releases to stabilize oil prices during the Hormuz crisis, but China's massive, discretionary pullback in imports—far larger than anticipated—was the primary shock absorber that prevented runaway prices and forced demand destruction globally.
China absorbed the majority of the global oil supply shock, relieving enormous pressure on the market. It accomplished this by sharply reducing oil imports by approximately 5 million barrels per day, likely supplementing its needs by drawing from vast, non-visible underground strategic reserves. This highlights China's pivotal, yet often opaque, role as a market stabilizer.
