China Saved the World Economy (So Far)

China Saved the World Economy (So Far)

Direct link to original post:https://verysmallocean.org/blog.html#china-saves-world-economy

An incomplete summary of China Quietly Saved the World Last Month (also embedded below) by Max Fisher

Months ago, the news and many other people were expecting a much more massive oil shock. Oil at $150-200 a barrel. Gas lines. No jet flights. An economic crash. But it didn’t happen. Why? China very quietly cut it’s oil imports by half, reducing them by 5.5 million barrels a day. According to the video author, “We heard that the world should’ve ended like 4 weeks ago.” – publication date 7/17/2026.

The Strait of Hormuz, before the Iran War quagmire/strategic catastrophe started, carried about 20% of the world’s oil or 20 million barrels. There is no slack in the system, really. 100 million barrels are produced a day and 100 million barrels are consumed (or stored). This global trade happens all in dollars.

So 20% of the oil disappears. But somehow the shortfall is soon changed from 20 million to just 5 million barrels a day. How? The size of China’s strategic petroleum reserve is a state secret, but it was believed to be well above 1500 million barrels, since that is the amount that can be observed and calculated from space and underground caverns are not space observable, plus other oil storgaes that are smaller and perhaps not state owned. So China bans fuel exports and refines less and conserves, and releases from its reserves. Altogether China reduces imports by about 5.5 million barrels. About 7 million barrels a day can be diverted through under-utilized Arabian Peninsula pipelines around Hormuz (now threatened by the Red Sea situation). 1 week into the war, 32 countries not named China or Russia banded together to release about 2.5 million barrels a day from their (oh so finite) strategic reserves. That gets us to 14.5 million barrels of extra oil + reduced oil use. The difference between mass worldwide blackouts and what we got, higher gas prices, more inflation and some gas lines in Southeast Asia.

The USA’s oil reserves are nearing functional zero, where no more can be pumped out of the giant salt caves even now. China’s reserves will eventually run out too, although I heard yesterday on NPR that the satellite observable tanks have not even begun to be depleted (the tops of the tanks rise and fall as oil is pumped in and out). US oil reserves started at 413 million barrels, enough to cover 60 days if 100% of oil imports stopped. Europe’s could cover only 10-20 days, and India’s only 4 days (IF 100% of imports stopped). China’s oil stockpile would one day run down too. They are or have importing lots of sanctioned oil separate from the global dollar market from Iran and Russia. But Ukraine’s long range sanctions against Russia, the Aral Sea and the Black Sea are disrupting one source and the US blockade of Iran the other. (If Trump was a serious person and went to war with Iran he’d probably be hitting their oil infrastructure too, but instead he has delusional fantasies of seizing the oil for himself).

So what else did China do other than banning refined products exports and using it’s strategic reserve? They have recently been building lots of wind, solar, hydro and EVs, but those were already running before the Hormuz crisis. They also had been building large coal power plants (unlike oil, China has plenty of coal) and were able to bring many of them online or up to full capacity. Air traffic fell by 5% while rail traffic went up 5%. And EVs are 25% of road traffic, which is up 33% on the previous year. And their gas prices went up much less than in the USA. So Xi Jinping and his phalanxes of bureaucrats and state owned enterprises (mostly) saved the USA’s economy and Donald Trump’s political fortunes (which are still bad, IF the elections coming up are free and fair and IF the real elected congresspeople are successfully seated in January, both under heavy fear, uncertainty, and doubt).

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