Show Notes
The biggest oil shock in modern history came and went without the catastrophe everyone expected. When Iran closed the Strait of Hormuz, analysts warned that oil could hit $200 a barrel, but the global economy avoided that fate.
The Trump administration has argued that the crisis was contained thanks to their aggressive action, but they may be taking the wrong lessons from the avoidance of that apocalyptic scenario.
What happened was the largest unexpected swing in global oil balances: China quietly cut crude oil imports by more than five million barrels a day. Yet there was no corresponding collapse in economic activity, no obvious drop in mobility, and no official explanation from Beijing. Somehow, China stopped buying oil from the rest of the world and started drawing from stockpiles we can’t fully observe.
That single decision may have done more to prevent a global energy crisis than anything Washington or OPEC accomplished.
This matters because it demonstrates that China likely has a stronger discretionary policy lever than the West does. The West is really good at market-driven, private-sector oil production. But through this crisis, we’ve seen that Washington does not have the scale of discretionary policy control that China or OPEC does. This time, China cooperated and did the good thing, at least for the broad economic picture — but we cannot rely on that in the future, and that tool can be used against the West as easily as for it. Western governments must grapple with that discretionary gap and not rest on their private-sector bona fides to get through the next crisis.
Arnab Datta, managing director of policy implementation at Employ America, and Rory Johnston, oil analyst and founder of Commodity Context, join ChinaTalk to discuss:
Why Rory’s own prediction of $200 oil never happened and why J.D. Vance is thanking the wrong people.
How China quietly cut crude imports by five million barrels a day with zero visible impact on domestic mobility, and the detective work analysts use to peer into Beijing’s black-box inventories.
Competing theories for why Beijing backstopped the global oil market — self-interested altruism, a backroom deal during the state visit, or a dry run for a Malacca blockade in the event of a Taiwan contingency.
What India, the Gulf states, and the rest of the world learned from the Iran War and why strategic reserves are suddenly back in fashion.
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Nick Brown is a co-founder of the Center for Technology and Statecraft (CTS), a new think tank spun out of IFP, that looks at long-term technology challenges and opportunities facing the US. Nick was a physics major, spent a while as a software engineer in and around government, and had an arc as an aspiring concert violinist. But we’re here to talk about what is in pole position for my paper of the year: his master class on what would happen if the US cut off DUV exports to China: DUV Immersion Lithography: The Foundation of US AI Compute Advantage. Co-hosting is ChinaTalk’s Aqib Zakaria.We discuss:
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