Publications: Notes at the Margin

Oil Price Stabilization: China as Buffer Stock Manager (September 15, 2025)

 

China has intervened in the global oil market to stabilize prices. In doing so, it has become the “oil buffer stock manager.” Not surprisingly, no one has noticed because commodity price stabilization is unfamiliar to most economists and reporters today. Few seminars on the issue take place, and even fewer papers discussing it get published. Three or four decades ago, in contrast, some of the best economists were writing detailed analyses of stabilization, often offering ways to control volatile commodity prices.

 

Forty years ago, formal programs for commodity price stabilization also existed. One of the most well-known, the 1954 International Tin Agreement, kept tin prices under control for more than three decades by creating a “buffer stock manager” for the metal. That manager, the International Tin Council, focused on preventing excessive price fluctuations and achieving a reasonable degree of price stability.

 

Today, China has taken on a similar role behind the scenes, acting as a buffer stock manager for crude oil to keep prices between $60 and $70 per barrel. So far, this strategy is working. Whether China can continue to stabilize prices will depend on its ability to add substantial amounts of oil to its strategic reserves. China may also seek to keep oil prices high to accelerate its electric vehicle sales, especially to South America and Africa.

 

China undoubtedly has its reasons for acting in this manner. Developing sufficient stocks to avoid the impact of high prices associated with market disruptions could be the primary driver. However, Chinese authorities may also seek to prevent precipitous price declines that would threaten demand for their country’s exports. They may also want to keep low prices from increasing the market power of Middle East exporters by forcing shutdowns of high-cost production.

 

Whatever the motivation, China is stabilizing crude prices, and that stability may last for a year or longer.

 

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