China's renewed fuel export ban rattles Australia, Japan and other importers after years of refinery cuts in some advanced economies

Compounded over ten years, the Energy Institute's averages put global refining capacity up about 6% and consumption up about 10% ^[14]. The gap opened slowly. Last year it widened, with consumption up 1.3% and capacity down 0.3% ^[2]. That is a one-year shortfall of 1.6 points, four times the decade's average of 0.4 points a year ^[15].

The global average hides who built capacity and who closed it, or rather, who closed it and now buys from the builder. OECD capacity fell 0.2% a year over the decade ^[3]. China's rate compounds to roughly a quarter more capacity ^[8][16], while Japan's minus 1.8% a year compounds to about a sixth less ^[17]. Australia's minus 6.9% a year, if it held for all ten years, leaves it with roughly half the capacity it had in 2015 ^[18]. Australia and Japan are two of the four importers the Seoul Economic Daily says are worried about supply disruptions under Beijing's renewed ban ^[10].

The Western response so far is a one-off stock release ^[6]. Its crude share reaches a diesel buyer only after a refinery processes it, and refining is the capacity OECD members have been running down ^[3]. Energy Secretary Chris Wright said in a CBS interview on October 4 that he expected US diesel prices to fall below $6 a gallon ^[7].

The IEA projects a record $3.4 trillion of global energy investment this year, 35% of it, or $1.2 trillion, in fossil fuels ^[11]. That leaves about $2.2 trillion for everything else ^[19]. The briefing does not separate refining within the fossil share or report refining margins, the number that would tell an owner whether reopening a plant pays. Daniel Evans, head of S&P Global Energy, said that without enough refining capacity, protecting consumers, securing energy supply and keeping trade moving all get harder ^[12].

Two readings fit this record. In the first, the squeeze is wartime trade disruption from the Iran and Ukraine wars ^[13]. Once Hormuz reopens and Russian exports resume, diesel falls and the closures look defensible on a ten-year view. In the second, a decade of underbuilding is the cause and the wars exposed it, so shortages come back at the next disruption.

I think the second fits better. The gap was widening last year, before the Iran war began in February ^[2][4]. China, the builder in these figures, has curbed exports twice since March ^[9][10]. The counter-reading of Beijing's ban is that it protects Chinese supply first. On that view the ban says more about tight Chinese markets than about leverage over importers. The capacity case is wrong if US diesel drops below Wright's $6 and inventories rebuild with no new refining added ^[7].