When a barrel of Saudi oil must detour around the Cape of Good Hope, it means our gasoline price rises by 50 cents per liter—every drop of crude, from the depths of the desert to the shores of the East China Sea, tells the same story: when globalized chokepoints are no longer secure, no one stands outside the impact.

Why is the CPI reacting so weakly? Because China’s energy consumption structure is relatively less dependent on oil and natural gas than other major economies—coal still accounts for about 55% of primary energy consumption. This ‘coal buffer’ partially insulates domestic prices from direct shocks of international oil price fluctuations. But the PPI is not so fortunate. Every 10% rise in oil prices pushes up the PPI by approximately 0.4 percentage points. According to data released by China’s National Bureau of Statistics in April 2026, domestic energy prices rose 5.7%—with gasoline prices surging 12.6%—due to volatility in international crude oil prices; this directly manifested in upward pressure on the PPI. CPI forecasts diverge markedly across different oil-price scenarios: • Baseline scenario (US$85/barrel): CPI center around 1.2%; inflation pressure remains manageable, allowing the central bank to maintain accommodative monetary policy. • Moderate increase (US$100/barrel): CPI center around 1.5%, still within the target range, but imported inflation begins to emerge. • Sharp increase (US$120/barrel): CPI center breaches the 2% target threshold, forcing the central bank into a dilemma between stabilizing growth and curbing inflation. • Extreme scenario (US$150/barrel): CPI center approaches 2.8%, signaling broad-based inflationary pressure and delivering a double blow to consumer and investment confidence. China’s ‘coal buffer’ can withstand moderate shocks—but under the extreme scenario, once oil prices exceed US$120/barrel, CPI will breach the 2% target threshold, squeezing the central bank’s policy space to its absolute limit. Chapter Nine The Future of Pipelines 7 million barrels per day is no longer enough—Saudi Arabia bets on expansion The 7-million-barrel-per-day capacity ceiling is already insufficient. When export volumes from Yanbu Port surge to 4.65 million barrels per day—just shy of full capacity—Saudi Arabia realizes: without expansion, this ‘desert lifeline’ will soon become a bottleneck. According to a Reuters report from July 2026, Saudi Arabia is considering expanding the capacity of its East-West Pipeline by up to 2 million barrels per day, raising total throughput from 7 to 9 million barrels per day. It remains unclear whether this will involve upgrading existing infrastructure or building a new pipeline; however, sources indicate the capacity boost may include a smaller-scale second parallel pipeline. A more ambitious plan envisions lifting capacity beyond 10 million barrels per day. That would require constructing a full-size parallel pipeline alongside the existing one—an investment potentially running into several billion dollars, with a construction timeline of at least three to five years. Saudi Arabia is also negotiating multilateral interconnection schemes with neighboring countries. Kuwait, Bahrain, and even Qatar have expressed interest in linking their exports to Yanbu Port’s export system via pipeline, collectively bypassing the Strait of Hormuz. Yet cross-border pipelines entail complex issues—including sovereignty, security, and revenue-sharing—causing negotiations to proceed slowly. The UAE’s Fujairah Pipeline (Habshan-Fujairah Pipeline, with a daily capacity of roughly 1.5 million barrels) offers another alternative route, delivering crude directly to Fujairah Port on the Indian Ocean coast—bypassing the Strait of Hormuz but not the Bab el-Mandeb Strait. Combined, the Saudi and UAE pipelines can reroute approximately 2.6 million barrels per day—still a mere drop in the bucket compared to the Strait’s average daily throughput of 21 million barrels. Pipeline expansion takes three to five years—but the crisis is already here. A distant solution cannot quench immediate thirst—in the interim, before pipeline expansion is complete, every tanker departing Yanbu Port must undertake a 48-day global detour.

Huatou News | Saudi Arabia: Oil exports begin bypassing the Strait of Hormuz

Recently, there has been a development in the Middle East situation that warrants close attention. Saudi Arabia is reviving a previously dormant ‘backup route.’ On October 6, Saudi Energy Minister Abdulaziz bin Salman stated that the throughput of Saudi Arabia’s East-West Pipeline has rebounded to 5.8 million barrels per day. This pipeline stretches approximately 1,200 kilometers—from Saudi Arabia’s major eastern oilfields all the way to Yanbu Port on the Red Sea coast. The most critical point is: It enables oil shipments to bypass the Strait of Hormuz. Why is this pipeline so important right now? Historically, vast quantities of Persian Gulf oil were shipped globally via the Strait of Hormuz. But recently, escalating U.S.-Iran tensions have severely undermined shipping safety in the Strait. For oil-producing nations, the real challenge isn’t whether oil exists—it’s: Once extracted, can it be transported out safely? That’s why Saudi Arabia’s East-West Pipeline has suddenly become critically important. According to official Saudi figures, the pipeline’s maximum designed capacity is about 7 million barrels per day—and current throughput has recovered to roughly 5.8 million barrels per day. In other words, Saudi Arabia is diverting part of its oil exports—originally destined for shipment through the Strait of Hormuz—to its western coast for Red Sea exports. This effectively adds a ‘backup route’ to global oil transportation. What does this mean for global oil prices? That’s precisely what markets are closely watching. In recent days, Middle Eastern oil exports have gradually resumed. Reuters data shows that in September, Gulf states’ exports of crude oil, condensates, and refined products had recovered to over 80% of pre-conflict levels—with Saudi exports recovering particularly strongly. On October 6, market data indicated that, over the preceding 7–10 days, approximately 12 million barrels of crude oil and 2 million barrels of refined products per day were being shipped globally from the Middle East via tankers. Thus, although international oil prices remain near US$100 per barrel, markets have avoided runaway escalation.

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FAQ