The seven-week-long war in Iran has shown that the regions are not equally hurt by the worst oil and gas disruption in history.
Asian countries, which are most dependent on oil and LNG flows from the Middle East, are already grappling with fuel shortages, airlines are raising fares and grounding flights, and refiners bid for every non-Middle Eastern barrel in a fierce competition to procure crude.
That’s true for most of Asia, but not for China.
Beijing has been amassing crude into commercial and strategic storage over the past year—at low oil prices and at even lower prices for Iranian and Russian supply.
Right now, China’s independent refiners can rely on the highest volumes of Iranian crude sitting on tankers since January to blunt the supply crunch due to the U.S. blockade of the Strait of Hormuz. The Iranian crude stored on tankers, which, by the way, is now officially unsanctioned by the United States, will allow China’s independent refiners to wait out weeks of blockade(s) at the most vital oil chokepoint, analysts say.
The most recent U.S. policy suggests that the Trump Administration is increasingly tolerant of geopolitical instability if it hurts competitors such as China, Reza Bundy wrote in an opinion piece in the Wall Street Journal.
“If a competitor’s growth depends on stable energy access, introducing uncertainty imposes costs that tariffs and sanctions can’t match,” Bundy argues.
The U.S. has been resilient to oil supply shortages, unlike Asia and Europe.
The Trump Administration’s argument is that America would not suffer because it is energy independent and the world’s biggest oil producer.
Related: South Korea Locks In 273 Million Barrels of Crude That Won’t Touch Hormuz
Being the top oil producer doesn’t make the U.S. energy independent—it still needs to import crude oil to meet 20 million barrels per day consumption with about 13 million bpd crude output, of which a fifth is exported.
If the conflict, blockades, ceasefires, and talks drag on for several more weeks, the U.S. will feel the consequences in crude oil prices.
The first direct consequence of the U.S.-Israeli war with Iran is already hitting American consumers. Gasoline prices spiked by over $1 per gallon in just six weeks. Inflation accelerated in March to 3.3% on a yearly basis, with the index for energy up 10.9% in March, led by a 21.2% surge in the index for gasoline, which accounted for nearly three-quarters of the monthly all-items increase, the U.S. Bureau of Labor Statistics said in the monthly CPI release.
