What War in Iran Means for China's Teapot Oil Refineries

SPEAKER_2 (0:02)

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Joe Weisenthal (0:18)

Hello, and welcome to another episode of the Odd Lots Podcast. I'm Joe Weisenthal.

Tracy Alloway (0:23)

And I'm Tracy Alloway.

Joe Weisenthal (0:24)

So Tracy, we are recording this 1 p.m. March 4th, 2026

Tracy Alloway (0:29)

So one of those days where you have to nail the hour and the minute, because who knows what's going to happen.

Joe Weisenthal (0:33)

Absolutely. Of course, we are in the midst of a war with the rent that started this past weekend. And it's been an extraordinary week in markets, massive surge in the price of oil, all kinds of concerns about the sheer logistics of getting oil, as well as other commodities, out of that region. Who's going to be affected? The ramifications are just global for obvious reasons.

Tracy Alloway (0:57)

Yeah, there's clearly a lot to talk about. But there are some interesting angles in particular that you and I have been discussing. And we're going to try to hit all of those individually in a lot of different episodes that are coming up. But for this particular episode, we want to talk about something that, you know, obviously the US, Europe have kind of been, I would say, the main subject of a lot of the hand-wringing or the focus at the moment. So Europe, we know, has had to grapple with higher energy costs for a while. And clearly, you know, all this chaos in the Middle East is not going to be good for that. But one thing that hasn't gotten as much attention is what this actually means for China, which is a huge, huge purchaser of oil from the Middle East.

Joe Weisenthal (1:42)

Right, this is really important. So obviously, in the US, we're swimming with oil, we're an oil exporter. This could be very good also for our gas exports to Europe. I mean, already we've seen this big increase in gas exports from the US to Europe, particularly just in the wake of the ongoing war in Ukraine. So this could create further opportunities. But for all the countries that are, you know, major importers, and China being one, it's obviously a very different dimension for them.

Tracy Alloway (2:08)

Absolutely. Also, can I just say that this particular topic is finally, finally an opportunity to touch on teapot refiners in China, which I always wanted to do an episode on.

Joe Weisenthal (2:18)

Great.

Tracy Alloway (2:19)

And for some reason we never got to it, but now's our chance.

Joe Weisenthal (2:23)

I will learn what a tea... I've known at times what a teapot refiner is.

Tracy Alloway (2:26)

Wait, what's your impression? If someone says teapot refinery, what do you think?

Joe Weisenthal (2:29)

Don't put me on the spotlight. I just imagine a little refiner.

Tracy Alloway (2:32)

Yeah, I mean, that's it, basically.

Joe Weisenthal (2:34)

All right. That was a good guess. The teapot, yeah, I guess it's kind of...

Tracy Alloway (2:37)

I just think it has a cute name, and so I like thinking about it.

Joe Weisenthal (2:40)

Anyway, I'm very excited to say we really do have the perfect guest today to sort of talk about the energy dimension from some angles that have that deserve and need more exploration in this precise moment. We're going to be speaking with Erica Downs. She's a senior research scholar at Columbia University Center on Global Energy Policy and an expert truly in this field. Erica, thank you so much for coming on Odd Lots.

Erica Downs (3:02)

Thank you so much for having me.

Joe Weisenthal (3:04)

Just for the sake of our audience, why don't you give us the sort of brief overview of your work? Tell us a little bit about what you do in your general field of study.

Erica Downs (3:12)

So my research focuses primarily on the geopolitics of energy. And so I've been kept busy recently looking at China's energy relationships with Russia, with Venezuela, and of course this week with Iran.

Tracy Alloway (3:28)

So why don't you sum up, I guess, China's relationship with energy at the moment then? The only thing I know in recent times that sort of hit the headlines is that China's been importing an enormous amount of oil, which both suggests that it needs oil and it's an important thing for its economy to work, but also that maybe in the face of tighter supply coming from the Middle East, it has something of a cushion.

Erica Downs (3:54)

So yes, China has been putting a lot of oil into storage. They kickstarted their strategic petroleum reserve over 20 years ago and have been building it up precisely to have in moments like the one that we are in now. Now China, as you mentioned, is a big importer of oil. About half the oil that China imports comes from the Middle East. Most of those Middle East oil supplies pass through the Strait of Hormuz, which is now closed.