I haven't had a chance to follow the current situation as closely as I would like, but I have seen little mention of China. On the trade war front, China is being squeezed, and I think President Trump is heading for a good deal with them. The oil problem will hurt China and make it easier to settle the trade situation.
That’s my take on it. I hear the Saudis can be back up and running in a couple weeks. 5% of the world’s oil production ain’t trivial but a couple week’s dip in production plays to all our strengths and none of China’s.
We are in a much better position energy-wise and policy-wise than if this attack had occurred on 0bama’s watch. I can’t comment on China but I am hoping you are right. And there is no need for us to be involved...unless Iran attacks Israel.... but I’m hoping the broader Mideast can step up to their own plate for a change and take care of Iran.
“The oil problem will hurt China”
Low oil prices is the only big thing that was going China’s way, and giving them a big reprieve on their balance of payments.
They are hugely dependent on oil and gas imports. They have been selling cars like crazy there, and their domestic demand for oil has been structurally rising rapidly, year after year.
They have to buy about 9 million barrels per day, so $10 a barrel more would hit them for over $30 billion per year in real dollars - hard currency, not their Monopoly money.
A $10 per barrel increase would drain their foreign reserves as much as a 7% tariff on all their exports to the USA.
Most big customers hedge their risk of market volatility, by signing long term delivery contracts, so such full and sudden effects to price swings would not be likely. But prices for some of their non-core demand would move on the spot price. The longer prices stayed higher, the more of China’s total imports would be paying the higher price.
China is one of the countries on Earth at highest financial risk to a severe rise in oil prices. It is hard to know the real value of their Foreign Reserves, except for their US Treasury holdings (a little over $1 trillion). Hong Kong is in worse shape than the mainland, but if one thing breaks, it could trigger others (stock markets, currency, debt/banking). If they start dumping Treasuries, it will likely be a sign of their approaching insolvency.
Beyond the end of China’s Foreign Reserves, lies a significant devaluation of their currency, and the wiping away of a lot of the net worth of their population. Probably a long period of low/no growth.