A key idea in Chinese statecraft since ancient times is that the state has a responsibility to stabilize inherently unstable markets for essential commodities (see How China Escaped Shock Therapy). Public stockholdings like the ever normal granary participated in the market buying when prices are low and selling when prices are high for centuries with the goal of stabilizing supply and demand, prices and ultimately the value of money.

Now China is doing just that with the global oil market: It has drastically reduced its imports, hence pushing down demand in a time of global supply shortages. This is possible thanks to massive public reserves and strategic redundancy (some like to call this “overcapacity”). @JavierBlas finds that the number one reason why oil prices have not shot above USD 100 is China, China and China.

Imagine how much more stability the world could enjoy, if all countries engaged in such buffer stock stabilization for essentials such as grain. I have been calling for this at the G20 food security task force last year (see link below).