The world economy has been largely spared from skyrocketing fuel prices in part for a surprising reason — China has cut back its daily imports by 3 million barrels of oil.

After Iran shut down the Strait of Hormuz in retaliation for the war, an export of at least 10 million barrels of oil a day from the Middle East were lost, with fuel prices soaring to a high of $126.41 as analysts warned for the worse.

But prices are now hovering at around $90, well below what experts predicted, and the clues as to why the global market has been spared points to China’s decision to reduce oil imports, the Wall Street Journal reported.

With no end in sight yet for the war in Iran, Saudi Arabia, the world’s largest crude exporter, opted to hike the price of its Arab Light grade crude to a record high of $19.50 a barrel in May.

Other nations followed suit to make up for the loss of exports due to the closure of the strait, which would leave China, the world’s largest importer of Gulf crude, facing substantial costs.  

Rather than pay up, China cut its imports from about 11 million barrels a day to around 7.7 million, according to Beijing’s customs data.

The massive drop in imports from China effectively kept the global oil supply from suffering the dramatic shocks experts predicted — along with the 2 million barrels of oil escaping the Strait of Hormuz every day.

Despite the disruption, China has been able to carry on largely unaffected thanks to its vast inventories built up over the years from when it bought oil at discount prices from Iran, Russia and Venezuela.

Emma Li, a China analyst at the Vortexa cargo and energy tracking company, noted that Beijing’s reserves were so vast that the country could hold out until the end of the year at its current rate.

“Based on our calculation, even if the inventory drawdown rate picks up to more than one million barrels a day, China’s commercial reserves alone are enough to sustain another six months,” she told the Wall Street Journal.

Part of the reason why China can afford to take a dip in oil imports is that its reliance on crude has dropped over the years thanks to their investments in electric vehicles and high-speed railroads.

Electric cars made up about a quarter of all vehicles on the road during China’s May Day holiday week, which runs from May 1 to May 5, with 15.4 million EVs travelling every day, according to Beijing’s Ministry of Transport.

That represents a 33% increase from last year, with rail travel in the same period increasing by nearly 5%, while air traffic fell by 5.7%.

It remains to be seen what China’s oil refiners will do in the event that crude oil futures and premiums on cargoes ease if peace is achieved in Iran.

Should Beijing suddenly increase its imports, it risks tightening the market and raising global fuel prices.

With Post wires