There's a classic scene in The Godfather where Michael Corleone looks at his rival and says: "I'm going to make him an offer he can't refuse." Well, Trump's been trying to pull that move on China. Except Xi Jinping apparently watched the movie all the way through — and knows that whoever holds the cards calls the shots.
The circus is in full swing.
On Monday, China got ahead of the game and made a point of telling the entire world it's "relatively fine" in terms of energy supply. Fu Linghui, spokesperson for the National Bureau of Statistics, dropped that classic Chinese understatement: the country's energy supply forms a "relatively good basis" for responding to external market volatility.
Translation from econ-speak to human language: "The Middle East can burn to the ground and we'll be just fine."
And to sprinkle in some hard data, the bureau announced that China's domestic crude oil production rose 1.9% in January and February, hitting 35.73 million metric tons. That's not self-sufficiency, obviously. But it's a message.
Trump's Request and the Reality of the Numbers
The day before, Trump suggested — according to the Financial Times — that China should help with efforts to restore the flow of oil through the Strait of Hormuz. His justification? That China gets "90% of its oil" through that maritime corridor.
Come on, Donald. Check your numbers.
Serious analysts estimate that China depends on the Strait of Hormuz for somewhere between 40% and 50% of its seaborne oil imports. And when you look at the full picture of Chinese energy consumption — including coal, nuclear, renewables, natural gas — the oil that passes through Hormuz accounts for a mere 6.6% of the total energy the country consumes.
Six point six percent. Trump is acting like China is some guy blasting the AC on a 104-degree day with someone threatening to cut the power. In reality, it's more like a guy who's got a generator, a fan, and a pool out back.
China's Oil Vault
And there's more. In January, Beijing was sitting on 1.2 billion barrels in strategic petroleum reserves onshore. One of the largest stockpiles on the planet. Enough to cover Chinese demand for three to four months without importing a single drop.
Meanwhile, oil blew past $100 a barrel — near four-year highs — because the flow through the Strait of Hormuz has been choked off for most countries since the war with Iran started over two weeks ago.
But here's the part the market pretends not to see: Iran shipped more than 11 million barrels of oil to China through the strait during that same conflict period. Read that again. While the rest of the world has its flow stuck, China keeps receiving Iranian oil. Nice and easy. Zero stress.
It's the perfect definition of skin in the game in reverse: China has every interest in keeping things running exactly the way they are. Why the hell would it help change a dynamic that benefits it?
The Chess Match Nobody Wants to See
Trump said he might even postpone his planned trip to Beijing at the end of the month if China doesn't cooperate. Threat or bluff?
Look, in energy geopolitics, whoever has reserves, whoever has alternative suppliers, whoever has domestic production on the rise — that guy doesn't need to rush. China is sitting on a mountain of stockpiled oil, with direct lines to Iran humming along, and an energy matrix that's increasingly diversified.
Trump is playing poker trying to bluff against a guy who's already seen his cards.
The big question Brazilian investors need to ask themselves: if China is in absolutely no hurry to fix Hormuz, and oil stays above $100... who foots the bill for this war of egos? Spoiler: the consumer. As always.
Keep your eyes on Petrobras, on the exchange rate, and on your fuel bill. Because when two elephants fight, it's the grass that gets trampled.
