U.S. military actions against Iran have caused a major disruption in oil supply, but the global economy has not been dragged into further recession. An article published by The Irish Times on August 14 states that one "unexpected" reason behind this could be China's significant reduction in oil imports, which has acted as a "brake" on international oil prices.
According to reports, during the peak of the supply interruption in April this year, the global oil supply chain lost as much as 20 million barrels per day. However, international oil prices never exceeded the critical threshold of $150 per barrel.
Economists believe that once oil prices reach this level, consumers and businesses will be forced to cut spending, which could trigger a chain reaction and severely impact the global economy.
The article states bluntly: What saves us from such a fate is an unexpected source—China.
Reports indicate that from February to June this year, China’s crude oil imports were reduced by nearly half, equivalent to a decrease of approximately 5.5 million barrels per day in demand. Experts estimate that this has caused the global benchmark Brent crude oil price to drop by at least $30 per barrel.
The Irish Times describes China's influence in the global oil market as so significant that changes in its demand have a greater impact on oil prices than even the Organization of the Petroleum Exporting Countries (OPEC).
As for how China maintains its economic operations despite a significant decline in imports, the article believes that the most persuasive explanation is the use of large oil reserves. According to estimates by the U.S. Energy Information Administration, China added an average of 1.1 million barrels of crude oil to its reserves per day by 2025. By the end of last year, the total reserves reached approximately 1.4 billion barrels. China has previously reduced imports when international oil prices rose, but this reduction is unprecedented.
"The Irish Times" also states that the US' military ventures in the Middle East have hurt its global standing and increased domestic pressure, while China can devote more resources to its prioritized technological competition.
