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China quietly saved the world last month — Transcript

by Max Fisher · 5,993 words · 907 segments · language en · Watch on YouTube

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0:00So you remember at the start of the Iran
0:01war, everyone said there was this oil
0:04shock coming that was going to basically
0:05blow up the whole world.
0:06>> World fears an oil shock.
0:09>> Global oil shock is raising alarms. This
0:11has the potential to be the biggest oil
0:14shock in history.
0:15>> All the flights were going to get
0:16grounded.
0:17>> Airlines are saying expect flight
0:19cancellation.
0:20>> They are cancelling flights. 13,000
0:22flights have been cancelled.
0:24>> Cities were going to go dark. the final
0:26um vessel carrying jet fuel into the
0:28United Kingdom is going to get here in
0:3048 hours and there's no more after that.
0:32>> Gas was going to triple in price if you
0:33could get any at all.
0:34>> Situation was looking pretty dire.
0:36>> Gas prices are expected to go up again.
0:38>> It would take months to recover it.
0:40>> This is just hard math. The world's oil
0:42was going to dry up and that would be
0:43that.
0:44>> How we emerge from this crisis will
0:46define us for a generation
0:48>> and then it just kind of never happened.
0:51oil futures. They're telling you in
0:53August [clears throat] actually prices
0:54are coming down.
0:55>> Markets seem to be showing far less
0:56alarm than they did at the start of the
0:59conflict.
0:59>> And it's not like the predictions turned
1:00out to be based on some mistake. You can
1:02go back and check their math. It's
1:03right. The world should have ended like
1:054 weeks ago. No. Something happened that
1:08no one expected that no one thought was
1:10even possible. The world got a savior
1:13and it was the last person that you
1:15would guess. Yes, it was the general
1:17secretary himself, the party chairman,
1:19Chinese President Xi Jinping. [music]
1:23And if you're thinking, okay, why didn't
1:26I hear about this? It's because China
1:28pulled it off basically in secret, which
1:30is kind of a weird way for an aspiring
1:32superpower to save the world. And it
1:33gets even weirder because the country
1:35they saved most of all is their chief
1:37rival, the United States.
1:39Well, today we are going to pull back
1:41the curtain on how China saved the world
1:44from the Iran oil shock. We're going to
1:46start by piecing together what China did
1:48that saved the world since it happened
1:50in secret. We're going to unravel how
1:52China did it because this should simply
1:54not have been possible to pull off,
1:55which will help us to answer why China
1:58did it, the theories for what was behind
1:59all this. And finally, we are going to
2:01look at what this changes in our global
2:04economic order. This is a crazy one,
2:07guys. This story is crazy. So, let's get
2:09into it.
2:13[music]
2:15Okay. So, to understand what China did,
2:17we're going to use the board to map out
2:19the global oil economy, what happened to
2:22it from the Iran war, and then what
2:24China did to save it from completely
2:26imploding. Good. So, the main thing
2:27about oil is it's traded in one unified
2:31global market. That means all the
2:33world's producers sell into the same big
2:35supply of oil which the world's
2:37consumers all buy from. And this is why
2:40when something happens in any part of
2:41the oil world like say a war in the
2:43Middle East, it affects everyone. And on
2:46any given day, there are about 100
2:49million barrels moving through this
2:51[music] system. 100 million barrels
2:54produced every day. And that is also 100
2:58million barrels that gets consumed every
3:01day. [music]
3:04And it's really important that these two
3:06numbers are the same. Every drop of oil
3:08that gets produced every day gets sold
3:10and consumed every day. There is zero
3:13slack in the [music] system. And that is
3:14why it is such a big deal when the Iran
3:16war starts and Iran shuts down the
3:18straight of Hormuz.
3:21[music]
3:22And doing this, shutting down the
3:23straight of Remove blocks 20 million
3:26barrels of oil per day from reaching the
3:29world. [music]
3:32So now we've only got 80 million barrels
3:34a day in output to meet 100 million
3:37barrels a day in demand. Right? This
3:39equation no longer balances. [music] We
3:42now have a 20 million barrel a day
3:45deficit.
3:48And this [music] this deficit means that
3:50pretty soon 20% of the oil consuming
3:53world was going to power down. That's
3:55one in five flights, one in five
3:57factories, power plants. It's a global
3:59calamity. Still, the world is ready with
4:01a couple of defenses including [music]
4:03this oil pipelines that go around
4:05Tormuse.
4:06>> This is the east west pipeline known as
4:09Petrol Line.
4:10>> That big one is controlled by Saudi
4:11Arabia and then the United Arab Emirates
4:13controls the other main one.
4:15>> This is the Abu Dhabi crude oil
4:17pipeline.
4:18>> [music]
4:18>> And these pipelines add about 7 million
4:21barrels of oil back into the system.
4:23It's a lot.
4:25Okay, so now just to make sure we're
4:27keeping score, we're at a negative 13
4:29million barrel a day deficit,
4:32[music]
4:33right? We removed 20 million barrels
4:34from the system. We added 7 million back
4:36in. 13 million deficit. It's better, but
4:39it's still really bad. Okay, so you guys
4:41are still with me. The other big defense
4:43that the world has is strategic
4:45petroleum reserves, emergency stockpiles
4:48of oil.
4:50[music] These tanks are all full of oil.
4:52America and other countries keep huge
4:53stockpiles like this for emergencies.
4:55And they're even bigger US stocks. I
4:56can't show you because they're kept in
4:58huge salt caves thousands of feet
4:59underground. Tons of countries have
5:01these reserves. Here's Japan's one of
5:02the world's largest. A week into the
5:04war, 32 of these countries got together
5:06and all opened up their reserves to the
5:08world. This was the largest release of
5:10reserve oil in history. Hundreds of
5:13millions of barrels from dozens of
5:14countries. It was a huge deal. But the
5:16war dragged on and on and it was
5:18stretching out these releases. So in the
5:20end they added up to an average 2.5
5:23million barrels per day.
5:26So these were the world's big defenses
5:28[music]
5:29for a mass oil shock like what happened
5:31in the Iran war. And together these
5:33bring our deficit down to 10 12 million
5:37barrels a day.
5:39This is still a calamity. More than a
5:42tenth of global energy usage. And it
5:43[music] gets worse. Those 32 emergency
5:46stockpiles from all over the world, they
5:48are running out.
5:50Here's America's reserve.
5:53It's dropping hard and fast towards
5:55zero.
5:56But here's Japan. It's same thing.
5:59Absolutely plunging. So, not only are
6:01these reserves tiny relative to the hole
6:03they have to fill, but they're only good
6:04for a few months and then they are gone,
6:06man. Which is exactly why everyone
6:09looked at all this and said, "Yeah, the
6:12world is ending." Until a few weeks in,
6:15people started to notice something weird
6:17happening.
6:17>> Good afternoon, everyone, or good
6:19morning or good evening or wherever you
6:21are.
6:22>> This is from a conference call a
6:23business intelligence firm called Kepler
6:25held back in April, walking its clients
6:27through what was going on in the oil
6:28market. And they focused on one thing in
6:30particular,
6:31>> what's happening with China, right? So,
6:32I just want to look at China monthly
6:34imports right now.
6:35>> China's oil imports. That's those bars
6:37in the chart had suddenly dropped to
6:39half half.
6:41>> See, and how much long how long could
6:42that carry on?
6:43>> I know those guys did not seem super
6:44emotive about this. I, you know, market
6:46analysts, but trust me when I say this
6:49discovery made people lose their minds.
6:52And let me give you some context for
6:54why.
6:58This shows China's oil imports since
7:001980. And that rise is one of the
7:02biggest stories in the history of oil.
7:04This is where China surpassed the US as
7:06the world's biggest oil importer and
7:08just kept going. Oil has powered China's
7:10rise from the start. Fuels their
7:11factories, [music] lights their cities.
7:13It's the engine of their economy. Yes,
7:15China has been building lots of solar
7:17and wind, but renewables like that still
7:18produce just a [music] fraction of the
7:20power that they get from coal, gas, and
7:23especially oil. Which is why it seemed
7:25impossible that right after the Iran war
7:28started, China's imports that have been
7:29rising for decades dropped overnight by
7:32half. This decline [music] here, 5 12
7:34million barrels a day is equivalent to
7:36more than all of India's oil imports.
7:40More than Europe's [music] five biggest
7:41economies combined.
7:43This was the thing that saved the world.
7:46China. China took its imports
7:50and magically cut it by 5 12 million
7:53barrels a day.
7:56Which means that what started as a 20
7:58million barrel a day deficit from
8:00Hormuz's closing is now after all those
8:02alternate pipelines plus emergency
8:04stockpiles plus China doing whatever
8:06it's doing means that deficit is now
8:08down to just 5 million barrels a day.
8:13And look, that's not great. That's still
8:15pretty serious. But everybody's shaving
8:175% off of their oil usage instead of 20%
8:19[music]
8:20is the difference between mass blackouts
8:22and economic collapse, which is what we
8:24thought we'd get, and a few months of
8:25higher gas prices, localized flight
8:27cancellations, and some gas lines in
8:29Southeast Asia, which is what we got
8:31instead. [music] So, yeah, I would call
8:32that basically saving the world really
8:35thanks to this guy.
8:37And before we go further, I want to
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10:07So, now let's get back to our story. But
10:10China has not said a thing, hasn't
10:12acknowledged they're doing this, hasn't
10:14said how or why, just stopped importing
10:17oil by the largest amount any country
10:19has ever stopped importing oil. Poof.
10:22overnight cold turkeyed this substance
10:24that the entire industrialized world
10:26[music] and China especially have made
10:29essential to their daily functioning for
10:31a hundred years. And since China won't
10:33tell us how they did this, we are just
10:35going to have [music] to piece it
10:36together ourselves. Starting with a
10:38quiet change China made right at the
10:39start of the war.
10:41This article from 2 weeks into the war
10:43revealed that China had ordered a total
10:46ban on fuel exports. The [music] context
10:48here is China has a huge refinery
10:50industry and what it does is it turns
10:52raw crude oil into stuff like jet fuel
10:54and gasoline [music] and most of those
10:55fuels stay within China but because
10:58they're good at it they export a bunch
10:59of it too all over Asia until March when
11:02China banned those refiners from
11:03exporting a drop of fuel and at the time
11:06everyone assumed this was to preempt a
11:08potential fuel shortage within China by
11:10building up stockpiles. One reason I say
11:11assume is that this ban was imposed
11:13that's right in secret. That's why the
11:15story is credited to four sources with
11:16knowledge of the matter. That means
11:17[music] off the record. But that
11:19assumption about why China was doing
11:20this was wrong. Turns out it wasn't to
11:22stockpile jet fuel or gasoline. [music]
11:23It was because China was about to stop
11:25importing half of its oil. So those
11:27refineries were about to do a lot less
11:29refining.
11:31[music]
11:33So rough math, I'm going to say that
11:35accounts for cutting about half a
11:37million barrels in daily demand [music]
11:39out of the 5 12 million that China cut
11:40overall.
11:43Okay.
11:44>> [music]
11:44>> Next big move. And if you care about
11:46climate change or air quality, you're
11:47going to want to cover your ears here.
11:49Coal.
11:53This is from a few weeks before the war.
11:55Why China is building [music] so many
11:57coal plants. And it found that China
11:58commissioned more than 50 large scale
12:00plants last year alone. So once the war
12:02started, China spun a bunch of those
12:04plants online or pushed [music] its
12:06existing plants into overdrive or
12:07probably both. But by April, it was
12:09burning a record amount of coal. China
12:12also figured out a way to use coal
12:14instead of oil to make plastics, which
12:16usually is a petroleum product. They
12:17also found a way to use coal to make
12:20fertilizer, which usually also is an oil
12:22byproduct. All of which allowed them to,
12:25[music] say it with me, import less oil.
12:28And we're not sure the exact amount, but
12:30let's just say, and this is a guess,
12:32another half a million barrels.
12:35Now, [music] by all accounts, life
12:37remained completely normal within China,
12:39like even more so than it did in the
12:41United States, where gas [music] prices
12:42were crazy. But China did find some ways
12:45to nudge people to use less fossil
12:47fuels. According to this Wall Street
12:48Journal story, for example, [music]
12:50after Chinese airlines canled a bunch of
12:52internal flights, and air passenger
12:54traffic declined about 6%. There was
12:56also a 5% rise in rail passenger
12:58traffic, meaning people just took the
13:00train. And by May, electric cars
13:02accounted for about a quarter of all
13:03vehicles on the road, up 33% from a year
13:06earlier. Now, China can't make and
13:08distribute 50 million new EVs overnight.
13:10But if you already got a large fleet in
13:12people's hands from years of subsidies,
13:13then when gas prices spike because, say
13:16it with me, China stopped importing oil,
13:18people with gas cars will start car
13:20pooling and their friend [music] Xiaomi
13:21SU7V, they'll start taking the train and
13:24gas consumption will go down.
13:27The effect of this one is hard to
13:29measure, but let's just call it another
13:31half a million barrels.
13:34Remember, that is more than half of all
13:35the oil that France imports. It is a
13:37lot. But we're still not really close to
13:39explaining all 5.5 million in China's
13:42disappearing [music] demand. And that's
13:43because we've got one big thing left.
13:46This is China's real secret [music]
13:47weapon. And it's something that we, the
13:49world, did not know about until now.
13:51It's in silos just like this. [music]
13:55This is a chart of the world's largest
13:57oil reserves at the start of the war
13:58before they got used up. But there's one
14:00country missing here, China. [music]
14:02And the size of China's oil reserve is,
14:05you guessed it, a state secret. But we
14:07can get a decent idea. These are some of
14:09China's crude oil silos. And the two
14:11main things to know about them are that
14:12they're really, really big, and that the
14:14domes on them go up and down based
14:16[music] on how full they are. All of
14:18which is fully visible from space. There
14:20are people whose whole job is to count
14:22those silos and how full they are to
14:25track how much oil China has saved up.
14:27They have more sophisticated ways to
14:28check those numbers, [music] too. But
14:29the silo counting works pretty well. And
14:31those silos alone suggest China has 1.4
14:35billion barrels saved up. That's more
14:36than every other country's stockpile
14:38added together. It would be enough to
14:40fill a 12t tank the size of Manhattan.
14:42And this is just the oil we know about.
14:44China also has oil stashed at factories
14:46and refineries around the country. and
14:48it's been building huge underground
14:49caverns to store oil away where no one
14:51can count it up. So actually, China
14:53might have way more than even the 1.4
14:55[music]
14:55billion barrels that we can see, which
14:57means China could use up, let's say, 4
15:00million barrels a day from those
15:01reserves and it would still take more
15:03than a year to run out
15:06and maybe even a lot more depending on
15:08how many of those caves it has. Now, I
15:10cannot tell you how crazy this is.
15:12India, for example, could live off of
15:13its stockpile for about 4 days. Europe's
15:16stockpile could serve it for maybe 10 or
15:1820 days. And the US stockpile, which
15:20took decades to build up and is the envy
15:22of the world, would be good for 60 days,
15:24which is why even with the US still
15:26importing from all sorts of sources
15:28outside the Middle East, Trump cried
15:29uncle 3 months into the war. So, you can
15:31understand the shock waves it sent when
15:33it turned out China, the world's biggest
15:35oil consumer, had saved up so much it
15:37could cut itself off in the world like
15:39this without breaking a sweat. But this
15:41raises a whole other question. How did
15:43China store away this secret and
15:45impossibly huge universe of oil, a
15:48Manhattan of oil? Where did it all come
15:49from? And there are basically two
15:51answers to this. In number one is Iran,
15:54and in number two is Russia. [music]
15:57Let me explain.
15:58>> The Iran and Libya sanctions bill I
16:00signed today will help to deny those
16:02countries the money they need to finance
16:04international terrorism.
16:06>> 1996, President Bill Clinton signs a law
16:09cutting off the world from buying
16:10Iranian oil. We'll get to how in a
16:12second. 2022, Russia invades Ukraine and
16:15the head of the European Union makes a
16:16big announcement.
16:17>> So today we will propose to ban all
16:21Russian oil from Europe,
16:23>> which the US and other big countries
16:24joined. All of which did, you know, it's
16:27easier actually if I show you on the
16:28board. [music]
16:30So two of the world's biggest oil
16:32producers, Russia and Iran, were mostly
16:34cut off from this global oil market. All
16:36that oil slloshing around, stuck with
16:38nowhere to go, nowhere to buy it. But
16:40wouldn't you know it, bit by bit,
16:43actually let me show you this too on the
16:44board,
16:48China found a way to get all that
16:50forbidden Iranian and Russian oil. This
16:52is a report by a think tank called the
16:54Atlantic Council tracking [music]
16:55China's secret oil trade with Iran and
16:57Russia. And they did it by using dark
16:59fleet [music] tankers that operate
17:01outside of maritime laws and obscure the
17:03operations. They rebrand the oil as
17:05Malaysian, funnel it through small
17:07independent refineries called teapotss,
17:09and then route the money via smaller
17:11back alley financial institutions with
17:13names like Bank of Kundo. But okay, if
17:15the world knows China is doing this, and
17:17all of this oil is supposedly under
17:19global economic sanctions that make it
17:21forbidden to buy it, then how does China
17:23get away with it? Well, it's by using
17:25their other secret weapon, this China's
17:29currency, the reni, the yuan.
17:33>> [music]
17:34>> And the reason that this works, that
17:36it's a magic hack, is because of
17:38something I didn't tell you about
17:39earlier about this global oil market.
17:41All of it, all of this oil is traded
17:43[music] in this US dollar.
17:47Couple of fine fellas we got up here on
17:49the board. All of the sales, all of the
17:51purchases, it's all in US dollars. And
17:54the reason for this is that oil trades,
17:56remember, happened between countries.
17:58But it would be chaos if every country
18:00paid every other country in a different
18:02currency. Nobody would know what the
18:03real price was and oil exporters would
18:05be stuck with this grabag of a 100
18:07foreign currencies that they wouldn't be
18:08able to use. But everybody can use US
18:11dollars. Everybody wants US dollars.
18:13[music]
18:13They're a safe way to save your
18:15country's oil revenues because the
18:16dollar is stable. Every other country
18:18accepts it in [music] trade. And trading
18:20all in one currency means there's just
18:23one price, which is what you need for a
18:25unified global market to function. But
18:27this gives the US a lot of power because
18:30trading in US dollars means those
18:31transactions have to be processed by a
18:33US-based bank, which means the US
18:35government can tell those banks to block
18:37oil trades with any country it doesn't
18:39like. People truly do not realize how
18:41much US [music] global power comes from
18:43these little green backs. But this means
18:45China and Russia and Iran were able to
18:47bypass [music] this whole system by
18:49using a different currency, China's
18:51currency, to process the sales. This
18:54makes these oil trades basically
18:56invisible to the US financial system and
18:58therefore the US government, which means
19:00the US can't block it from [music]
19:02happening. And if you're wondering why
19:04more countries don't do this kind of
19:05thing, it's because they don't have a
19:07currency Iran or Russia or whoever would
19:10want. The remov can't do everything the
19:11dollar can do, but it can buy stuff from
19:14China, and China is the world's largest
19:16exporter of stuff. So that currency is
19:19still useful enough for Iran and Russia
19:21to go to the trouble. Probably the only
19:23other currencies in the world valuable
19:24enough to do this are the Japanese yen
19:26and the euro. But Japan and the European
19:28Union are big supporters of sanctions on
19:30Iran and Russia. So they wouldn't want
19:31to do this. So it is really just China
19:33that can pull this off. And being the
19:35only willing buyer of Iran and Russia's
19:37oil means they get a big big discount.
19:40Which is how they were able to quietly
19:41stock up a billion plus barrels of
19:44probably mostly Iran and Russian oil so
19:46they could magically stop importing
19:48enough oil for enough time to basically
19:50save the world. So that is how China
19:52saved you, me, the global economy, and
19:55especially the United States and Donald
19:57Trump from the largest oil shock in
19:59history. But that still leaves us the
20:01question of why? Like I'm more curious
20:04than ever. Why? Why would they bail us
20:06out? And why would they do it in total
20:08silence? And to answer this, we are
20:10going to need the other side of the
20:12board.
20:13So we're going to use the board to go
20:14through four theories for why China did
20:17this that I think all have some merit
20:19and some evidence to them. But first, I
20:21want to rule out two that I think don't
20:23scan. Number one, probably the one
20:25you've been shouting at your screen for
20:26the last 10 minutes because it seems so
20:28obvious, is that China did this. China
20:29stopped importing oil just to protect
20:31themselves from high oil prices. But you
20:34know what? This one
20:37doesn't hold up. Here's why. And one
20:39number, $74. That is the average
20:42replacement price on China's oil
20:44reserves that they have been burning up.
20:47[music]
20:47Here's the price of oil over the last 6
20:49months. And here's where the price
20:51dropped below $74. If China was just
20:54trying to protect itself from price
20:55shocks, this is the point that they
20:57would have started buying again. They
20:58would have actually made a profit by
20:59buying at this price. But they didn't.
21:01They just kept burning reserves, which
21:04means they had some other motive, right?
21:06So, second wrong theory we need to rule
21:08out. This was all a soft power play for
21:11global goodwill. I'm sorry about the
21:13panda. I know it's a total cliche. When
21:15you Google image search Chinese soft
21:17power, this is the first thing that
21:19comes up. So, I don't know. I went with
21:20it. Anyway, it's also wrong. This soft
21:24power theory does not square with
21:25China's big ban against its refineries
21:28exporting jet fuel or gasoline because
21:29this really hurt the neighbors in Asia
21:32who count on China for that stuff and
21:34are the exact countries China most wants
21:36to improve its standing with. For
21:37another thing, remember China did all
21:39this and didn't talk about it. If you
21:41save the world to make countries like
21:43you, wouldn't you, I don't know, mention
21:44it at least once instead of hiding it in
21:46secrecy? So these theories, I think
21:49these are out.
21:51So now let's look at the theories that
21:53do make sense. Starting with the big
21:56one, Taiwan.
21:58[music] Here's Asia. And here's the
22:00straight of Hormuz, which we learned
22:01controls 20% of the world's oil flows.
22:04And now this is the straight of Mala.
22:06Even narrower, even easier to close. The
22:08ships that go through here carry 80% of
22:11all China's oil. And in any worse
22:13scenario with Taiwan, one of the very
22:15first things that happens [music] is the
22:16US uses its naval supremacy to close
22:19Mala like Iran closed Harmuz, shutting
22:21off China from outside oil and bringing
22:23China to its knees.
22:27[music]
22:29So yeah, pretty powerful, right? Defeat
22:31China without ever coming within a
22:32thousand miles of it. And this has
22:34obsessed China's leaders for decades.
22:36They actually have a name for it. They
22:37call it the Malaa dilemma. And it
22:39applies to any war scenario with the US.
22:41But Taiwan is probably the likeliest.
22:43So, how can you neutralize the threat of
22:45suddenly losing access to outside oil?
22:47Well, one way is to build up renewable
22:48power sources like wind and solar,
22:50which, yeah, check, China [music] has
22:51been doing. Another is burning more
22:53coal. Check. But the best way is to
22:56stockpile so much oil in advance that
22:58you can go without imports for a year
23:00and keep the lights on for as long as
23:01the war takes. [music] Under this
23:03theory, China had this whole no oil plan
23:05ready in case of war. But they pulled it
23:08off now both because they could and
23:10maybe as a little demonstration to the
23:12US and Taiwan that the Malaa problem is
23:14kind of solved just to threaten them
23:15anymore. So don't expect them to hold
23:17them back. Okay, ready for theory number
23:19two? Leverage with Donald Trump.
23:23Trump and she actually just had a big
23:25one-on-one summit in May. And you know,
23:27watching this, it's not hard to imagine
23:29she telling him, "Hey, Donald, I'm
23:31single-handedly saving your economy
23:32right now by absorbing the oil shock so
23:34it doesn't hit the United States. So,
23:36you want me to keep this up? You better
23:38make it worth my while because he knows
23:39if there's one thing Trump has shown
23:41he's sensitive to, [music] it's the
23:42price of oil. Now, nobody can prove this
23:44happened. Yeah, a few weeks beforehand,
23:46the US did withdraw a bunch of missile
23:48defense and other weapons from China's
23:50periphery, which China liked to use in
23:52the Middle East, but that might be a
23:53coincidence. I would consider this the
23:55softest theory. Still, as long as the
23:57war goes on, Xiinping really could nuke
23:59the US [music] economy anytime he wants
24:01by resuming Chinese oil imports and
24:03exhausting global supplies. Did he
24:04remind Trump of that fact when they met?
24:06You know, we don't know. If you're still
24:08watching, you probably want to
24:09understand the world better. And so do
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24:35among other things, a podcast Johnny and
24:37is are launching this week, as well as
24:39an exclusive video series I'm doing and
24:41been doing for a while there that I'm
24:42really excited [music] about. No Dumb
24:44Questions, where I answer big questions
24:46about the world submitted by viewers
24:48like you. In this week's I take on a
24:49bunch of questions about China's [music]
24:51rise as a world power, like how did
24:53China and the US become adversaries in
24:55the first place? What is China's
24:56ultimate endgame as a [music] great
24:57power? What does it want? And a lot
24:59more. You can check it out at
25:00newpress.com/quests
25:02and the link is in the description. Now,
25:04let's get back to it. Okay, theory
25:05number three, and I'm pretty partial to
25:07this one. Protecting China's
25:09export-based economy.
25:13China's economy, like we said, centers
25:15on manufacturing and exporting basically
25:17everything in the world. [music]
25:20Here's every country China exports to,
25:22scaled by overall value.
25:26Now, let's cross out all the countries
25:27whose economy would implode in a
25:29sustained oil shock. This one? This one?
25:34Probably these guys. Definitely the
25:36Europeans. Yep. Here. Okay. Well, China
25:39just lost half of its export market and
25:42a bunch of its economy with it. [music]
25:46Or that's what would have happened if
25:48China hadn't propped everyone up for 3
25:50months by absorbing the oil shock. Now,
25:52I can't prove that's why they did it,
25:53but I do think it would make a lot of
25:55sense. Okay, theory number four. They
25:58did this to prove to the world that
26:00China now controls the global price of
26:03oil. I had to print this out of my home
26:05printer because the photo printer
26:07stopped working. That's why the Chinese
26:09flag is purple. I don't know. My
26:11apologies to China. [music]
26:13Credit for this theory goes to a
26:15Bloomberg columnist named Javier Bloss
26:16who argued this was China unveiling its
26:18powerful new oil price weapon. He
26:20compares it to the 1973 oil shock when
26:23Arab oil states like Saudi Arabia and
26:25some others shut off oil to the US, a
26:27power that got termed the Arab oil
26:29weapon and made those states a global
26:31player ever since. And he argues that
26:34yeah, on some level this was probably
26:35about Taiwan and Malaka. But if China
26:38proved that it can flip 5% of the
26:41world's oil demand on and off like a
26:43switch, that gives them Saudi Arabia
26:45level influence over the world's most
26:47valuable resource, which gives them a
26:49lot of leverage over any country that
26:51buys a lot of oil or that sells a lot of
26:53oil, which is pretty much all of them. I
26:56think there's probably some truth to all
26:58four of these series, right? I don't
27:00think they're mutually exclusive. Now,
27:02we don't know enough. We can't peer
27:03inside Xiinping's head and know like
27:05which one is the truest. But I think if
27:07you look at these four together, you
27:09have a pretty good understanding of why
27:11China did this. So, okay. So, the
27:13question now is what does all this add
27:15up to? What does it change about our
27:18world? And we the world learned a few
27:20new things here. One, China has
27:22neutralized the so-called Malaa dilemma
27:25that would have allowed the US Navy to
27:27shut down their economy. And that makes
27:29war with the US more bearable for China.
27:32and an invasion [music] of Taiwan,
27:33therefore more likely. And two, China
27:36now has a lot of control over global oil
27:39prices. Although I don't think we yet
27:41know how they would use that power,
27:42except how they did here to blunt a
27:44global oil shock. But you know, the Iran
27:46war is still a little low boil, which
27:48means as long as Hormuz is at threat of
27:50closing or partially closed, Xiinping
27:52has a lot of leverage over the United
27:54States. He has that button on his desk
27:56that [music] says nuke US economy. And
27:58along those lines, the US, China's big
28:00rival, it came out of this war weakened
28:02on the world stage in a lot of different
28:03ways that we talked about [music] in the
28:05last video.
28:08Russia, meanwhile, is still mired in
28:10Ukraine. That means that among the major
28:11world powers, China is looking pretty
28:13good right now, which is part of why
28:14there is a growing consensus that the
28:16war's real winner was China. China won.
28:20They're the winner. China's the big
28:22winner here. [music] China wins.
28:27This is a little too clever. I think
28:28Iran won the Iran war, but China did win
28:31something very, very big. And it's easy
28:34to explain if I put it on the board for
28:35you.
28:39So, forever and ever, these have been
28:41the three world powers of oil for like
28:44the last century. The US, Saudi Arabia,
28:47Russia. They are the three biggest
28:48producers in the world by far. The US
28:51guarantees free flow of oil in the
28:52world's oceans and controls the US
28:54dollar. Saudi Arabia is the de facto
28:56leader of OPEC, the alliance of oil
28:58producing states. And Russia, in
29:00addition to being a world power and a
29:01huge exporter, controls land-based oil
29:04flows across a bunch of Europe and Asia.
29:06But this era might be over or at least
29:09starting to end. The US proved in the
29:11Iran war that it cannot guarantee the
29:13global free flow of oil anymore. And
29:15Russia is under global sanction and can
29:18barely sell its own oil. So these two
29:20powers might be out.
29:24[music] And who displaced them? Well,
29:26arguably one of them is Iran, which is
29:29not the world's biggest producer.
29:31They're ranked seventh, [music] but they
29:32prove that they can unilaterally turn on
29:34or off 20% of the world's oil supply,
29:37and [music] nobody can stop them.
29:43And the other new global oil power, I
29:46think you know where this is going. I
29:47think you can make an argument for
29:49China. You know, they kind of control
29:51the price of oil now, or at least have
29:53huge influence over it, because they
29:54[music] can switch 5% of global demand
29:57on and off, and because they were able
29:59to do what the United [music] States
30:00wasn't in this war, and secure
30:02sufficient flows of the world's most
30:04important resource, [music]
30:06single-handedly saving the oil burning
30:08world from disaster. That sounds like
30:10the behavior of a global oil power to
30:12me.
30:16Now, [music] I don't know what China
30:18wants to do with that power. I mean, we
30:20have some educated guesses, obviously,
30:22but [music] they're not telling us. They
30:23might not even know. They might have
30:25themselves just discovered how powerful
30:27they are here, right along with the rest
30:28of us. But one thing is for sure. Now
30:30that they have this power, they've
30:32demonstrated [music] it, they've proven
30:33to the world that they have it, I am
30:35certain this will not be the last time
30:37that we see it deployed.
30:40[music]
30:44D.
30:47[music]
31:00>> [music]

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