Erica Downs and Michal Meidan on China's Oil Shock That Wasn't

Michal Meidan (0:04)

This year, both Sinopec and CNPC, the two largest oil companies in China, are saying that oil demand more broadly has peaked. And so to a certain degree, in the Chinese thinking, oil is yesterday's story.

Erica Downs (0:17)

What analysts in China have been saying about this crisis and about China's energy security is the view that the source of global energy security is shifting away from control of resources, like oil, to control of technology.

Bill Loveless (0:39)

In the weeks and months after the start of the U.S.-Israeli war in Iran, as oil tankers stopped transiting the Strait of Hormuz, analysts expected China to scramble to replace lost imports. Instead, available data shows that the world's largest oil importer actually cut imports. By June, China's reliance on foreign oil hit the lowest level since October 2016

The energy giant didn't even touch its oil reserves until May or June, and even then at modest levels. But the bigger surprise, perhaps, is that we've not seen the disruptions to China's economy that some expected. There's been no fuel rationing, no working-from-home mandate, and the oil shock hasn't appeared to impact the country's electric power system. So why hasn't the Chinese economy been harder hit? How much of this outcome is owed to the country's careful planning? How much to its diverse energy sourcing or demand reduction? And what does all of this say about the ways that energy security is shifting and perhaps being redefined in China?

This is Columbia Energy Exchange, a weekly podcast from the Center on Global Energy Policy at Columbia University. I'm Bill Loveless.

Today on the show, Erica Downs and Michal Meidan. Erica Downs is a senior research scholar at CGEP, where she focuses on Chinese energy markets and geopolitics. Earlier in her career, she worked as a senior research scientist in the China Studies Program at the CNA Corporation, a senior analyst in the Asia Practice at the Eurasia Group, and an energy analyst at the US Central Intelligence Agency.

Michal Meidan leads China Energy Research at the Oxford Institute for Energy Studies. Previously, she headed cross-commodity China research at Energy Aspects and led China Matters, an independent research consultancy. We discussed a recent post that they wrote for the Center on Global Energy Policy where they examined how China is managing lower oil imports and what it reveals about the tools Beijing has built over decades to manage a supply shock of this magnitude. We considered the role of China's strategic petroleum reserves, its state-controlled fuel pricing and the small independent teapot refiners. And most importantly, we talked about what the oil shock has revealed about China's energy system. Here's our conversation. Erica Downs, Michal Meidan, welcome to Columbia Energy Exchange.

Erica Downs (3:21)

Thanks for having us.

Michal Meidan (3:23)

Thank you. It's great to be here.

Bill Loveless (3:24)

And in your case, Erica, welcome back. My colleague, you've been on the program a number of times. Glad to have you back here again.

You know, we continue to watch the turmoil over the war in Iran, the implications for oil markets from the disruptions in the Strait of Hormuz and elsewhere. And we're constantly trying to figure out what is going on. You know, we watch the price of oil from day to day and the impacts it has on markets around the world.

It's a confusing situation for so many of us. And here we have China, which is the world's largest oil importer. You know, as I say, the strait has been severely disrupted by this war. But we come back to China. Erica, how has China responded to the situation?

Erica Downs (4:18)

So China has been very calm and confident in their ability to manage the supply disruption.

And one of the main things they did was to reduce their crude oil imports. In the blog post that Michal and I recently put out, we note that China was able to reduce its crude oil imports. In the second quarter of 2026, by about 30 percent or 3.5 million barrels per day. Even though the war started on February 28th, we use April as the start date for our analysis because of the sailing times between the Persian Gulf and China. So any oil from suppliers that use the Strait of Hormuz, that had transited the Strait of Hormuz by before February 28th would have been arriving in China throughout March. So that explains the April start date. And, you know, very high level in terms of trying to figure out exactly how China brought about this decrease in its crude oil imports.

Our analysis shows that it was roughly divided between tapping into oil inventories and reduced refining runs, and we can get into the different factors that account for those reduced refining runs.