China Is Now the Global Oil Power

Don’t you just hate it when you’re working on the assumption that it’s one thing, and turns out it was something entirely different?

Take the war with Iran, for instance. The media and the politicians told us it was about the threat of nuclear weapons. Maybe some truth in that, maybe not. Who knows?

It’s turning out, however, that the war is really about China and oil—and inside that, there’s an existential threat to your wallet.

See, the strangest thing about summer 2026 is the thing that didn’t happen.

Everyone was sure it was going to happen back in the spring, when Trump was bombing Iran and Iran was responding by shutting down the Strait of Hormuz, the little chokepoint of water that usually sees one-fifth of the world’s oil supply flow through daily.

Pretty much every economic model projected that Iran closing the strait would send oil prices barreling higher. We were told $200 oil was incoming.

And yet… Brent crude, the global bellwether, touched $126 before returning to a more natural resting state in the $80 to $95 range.

American drivers grumbled. I grumble here in Portugal, where gas is now the equivalent of $7.65 per gallon.

No one panicked, though.

The global economy barely even wobbled.

The reason why is a story of unintended consequences Washington probably doesn’t want to talk about.

The reason: China.

As the war was raging, China was methodically cutting its crude oil imports by nearly four million barrels per day. That alone absorbed roughly three-quarters of the entire global crude oil import decline caused by the war… which dampened those $200 predictions.

No one saw it coming.

Which is pretty much the China story writ large: No one ever seems to see coming the huge impacts China ultimately has. (I see them, and I write about them all the time, but I’m often told I’m a big ol’ gumbah for predicting what I see…)

This latest “no one saw it coming” is particularly troublesome.

Because it demonstrates that China, not OPEC, is now the global price mover.

OPEC is the big producer… but China is the big saver. The country spent 2024 and 2025 building the world’s largest strategic petroleum reserve—upwards of 1.4 billion barrels of oil.

That, along with a purposeful reduction in consumption, has allowed China to reshape oil markets.

When the Iran War broke out in February, China didn’t need to buy oil in a panic to keep the lights on. It drew down its stockpile where necessary, and restricted refined product exports to keep domestic supply stable.

This wasn’t distress or scarcity. It was strategy built atop a vast savings account of oil.

Meanwhile, Saudi Arabia and the United Arab Emirates spent the spring redirecting roughly 5 million barrels a day of crude through pipelines that bypass the Strait of Hormuz entirely. That infrastructure served Chinese refiners regardless of what happened in the shipping lanes… meaning Gulf states reorganized around a single customer that actually mattered more than America.

And why all this matters to me and you…

The petrodollar, the system in place since the mid-1970s in which OPEC promised to price oil in dollars. That required every country on the planet to hold dollars in reserve to pay for the oil they needed to run their country.

The petrodollar became the backbone of the dollar’s role as global reserve currency.

But the unintended consequence of America’s war with Iran has spotlighted China’s new role as an oil giant.

As the war raged and as those calls for $200 oil rang out, OPEC found that it wasn’t the one with pricing power. That now belongs to Beijing.

Which brings us to a question that’s no doubt troubling for the folks in DC who manage the dollar: Once pricing power moves to the buyer and not the producer, when does the settlement currency change?

When does the petrodollar become a petroyuan? Or at the very least, when are the dollar and the yuan both at the center of the global oil trade?

Either way, one of the structural supports for the dollar’s reserve currency status is now visibly weakened because of what the Iran War accidentally revealed.

That will continue to play over the rest of the decade, and it’s bad news for the dollars in your wallet. More to come soon…