China's secret oil stockpile saved our gas prices

Since the outbreak of the Iran war, the feared oil super-shock with skyrocketing oil prices has failed to materialize—because of China. The country throttled its oil imports by around 40 percent and has since been living off its huge reserves, which it accumulated over years. But Beijing did not do this out of charity. It saved money and kept Asian sales markets stable. And another motive could be behind it. There is much to suggest that China was practicing for a worst-case scenario: a war with the USA in which it would be cut off from its oil imports. 

Since the outbreak of the Iran war, experts have been warning of extremely high prices at gas stations. And indeed, filling up has become more expensive than ever before. Nevertheless, the really big shock did not materialize. Some analysts had thought $200 per barrel to be possible. However, „only“ a good 126 came. And there is a reason for that: China.

Since the start of the Iran War, China has reduced its oil imports by about 40 %

Since the beginning of the war China curbed its oil imports by around 40 percent. The country is the largest oil importer in the world. If this country imports 40 percent less oil than usual within a few months, global demand drops enormously, which causes prices to fall.

And precisely that has happened in recent months: After Iran closed the Strait of Hormuz, global oil supply collapsed and prices at the gas stations rose. But because China imported much less at the same time, the price increases fell short of the apocalyptic fears. Thus, China cushioned the rise in oil prices and prevented an even greater price shock.

For years, China bought cheap oil from Russia & Iran

This was only possible because China had been hoarding oil for years beforehand. Specifically, in quantities that is probably only possible in a planned economy: At the beginning of 2026, there were estimated 1.4 billion barrels in China's warehouses. Enough to replace all imports for about four months. In 2025 alone, the country has stockpiled an average of around one million barrels per day and built new deposits at a rapid pace. China has been doing this for years Bought oil cheap – above all from the Western-sanctioned states of Russia and Iran.

When the Iran war broke out and prices rose, Beijing did not make expensive purchases, but instead lived off its own stockpiles. Socêté Générale analysts call precisely this withdrawal of China from the market the decisive force that brought the oil price back into balance.

Why is China doing this?

There are various explanations for why China did this. The most obvious one: It pays off. China buys cheap and stockpiles. When the price rises, the country lives off the stockpile. When it falls, it buys more at a low price. Precisely this pattern can be observedWhen the oil price fell to 70 dollars at the end of June, imports picked up again. When it climbed toward 90, the refineries held back.

But this explanation has a catch: at the end of June, China did not buy back as much oil as one would expect. Although the oil price fell, July imports were still around one quarter below the previous year's figure. A bargain hunter would have bought more heavily at 70 dollars. In addition, part of the increase was not even additional buying, but rather the imports that, due to the got stuck in the Strait of Hormuz and arrived late.

And most strikingly: China has not refilled its huge inventories. Anyone who pauses solely for price reasons immediately starts hoarding again at the next price low. China did not do that.

Did China want to protect its Asian neighbors from an economic crisis?

The second explanation is that China wanted to protect its Asian neighbors from high oil prices: Japan, South Korea, and India are among the most important buyers of Chinese goods. They depend on Gulf oil even more heavily than China itself in some cases, but do not have reserves on the scale of China's. A price shock could have triggered an economic crisis there that would have rebounded onto China. In fact, China's withdrawal from the global oil market has relieved pressure on other Asian countries.

Only: China has not boasted about this so far. Normally, China misses no opportunity to present itself as a good neighbor. During the corona pandemic, for example, China delivered masks and vaccines to countless countries and portrayed himself in his state media as the “savior of the world”. Of all places, the Chinese leadership remained silent here.

There must therefore be another reason why China has curbed its imports. And this reason probably lies not in the oil market, but in geopolitics.

Is China provoking war with the USA?

China has a strategic problem that has had a name in Beijing for decades: the Malacca dilemma. China imports around two-thirds of the oil it consumes. Most of it arrives by ship—and about 80 percent of that through the Strait of Malacca, a narrow passage between Malaysia, Singapore, and Indonesia. In the event of a war, for example over Taiwan, the US Navy could block this passage. For China's economy, that would be a disaster. 

Therefore Beijing has taken precautions: above all with the huge warehouse, but also with Pipelines from Myanmar, Kazakhstan and Russia, and with alternative routes through other straits. Only it could never be tested whether this system would hold up in a serious emergency. Some political observers suspect that China has now made up for this test. Oil market analyst Rory Johnston puts it this wayHow do you simulate a blockade of Malacca? The sudden failure of Hormuz was the perfect natural experiment. Can China decouple itself from the seaborne oil market? The answer, according to Johnston, is: yes.

According to this reading, the world has just witnessed China's dress rehearsal for a conflict—and incidentally benefited from it. Beijing demonstrated to the US that its sharpest weapon, the naval blockade, is blunter than thought. That the oil price fell for everyone in the process was a side effect.

None of this can be proven. Beijing fundamentally never comments on its reserve policy. But it would be the explanation that leaves the fewest questions unanswered.

China merely postponed the price shock

No matter which explanation applies, this cannot go on forever. According to the analytical firm Energy Aspects, commercial surplus stockpiles are almost depleted. What remains are the state reserves, which Beijing is hardly going to touch just for a test.

At some point, China has to return to the market and restock. Société Générale is already warningWhen reserves are replenished, the oil price could rise again. So China likely did not prevent the price shock, but merely postponed it.