Edward Conard

Top Ten New York Times Bestselling Author

  • “Unintended Consequences is far smarter and more thought-provoking than most economics written for the general public” - Greg Mankiw, Harvard University, Former Chairman of the Council of Economic Advisors
  • “Unintended Consequences offers deep and well-argued analyses on almost every issue.” - The New York Times
  • “…a comprehensive explanation of the modern economy.” - Julian Robertson, Founder, Tiger Management
  • “…a very valuable contribution.” - Larry Summers, former Secretary of the Treasury and director of the National Economic Council, president emeritus, Harvard University
  • “…a fresh argument for the productive value of inequality.” - David Autor, Professor of Economics, Massachusetts Institute of Technology
  • “…a comprehensive explanation of the modern economy.” - Julian Robertson, Founder, Tiger Management
  • “Unintended Consequences should be read by anyone who takes for granted the superiority of progressive taxation and has not thought carefully about the trade-offs involved.” - The New Republic
  • “…serious thinking for serious thinkers. …a thought-provoking blueprint for growing middle- and working-class incomes.” - Mitt Romney, former Governor of Massachusetts
  • “Unintended Consequences is full of substance, it is one of the must-read books of the year, and once I finish it I will be giving it a second read through right away.” - Tyler Cowen, Professor, George Mason University
  • “…challenges misconceptions that distort our economic debates.” - Arthur Brooks, President of the American Enterprise Institute
  • “…a must-read for serious students of economic policy.” - Glenn Hubbard, Dean, Columbia Business School, and former Chairman of the Council of Economic Advisers
  • “…a fresh argument for the productive value of inequality.” - David Autor, Professor of Economics, Massachusetts Institute of Technology
Upside of Inequality Oxford Unintended Consequences

Macro Roundup


Friday, August 7, 2026

AI Summary. 30% of US adults have literacy skills typical of a 10-year-old, yet US workers scoring at that low level earn an average of nearly $30 an hour and two-thirds are employed, compared with about $20 and fewer than half employed in Britain. The author argues this reflects stronger economic growth rather than vocational education policy.

John Burn-Murdoch Financial Times
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Using OECD skills data and the Luxembourg Income Study, Burn-Murdoch finds US workers at the lowest levels of literacy and numeracy earn ~ on par with British workers scoring a 2, ~ a mean score.

Does economic growth matter more than education policy for low-skilled workers' pay?

Core argument: 30% of US adults have literacy skills typical of a 10-year-old, yet US workers scoring that low earn an average of almost $30 per hour and two-thirds of them are employed.

30% of US adults have literacy skills typical of a 10-year-old. The same proportion of US workers who score stunningly low on literacy earn an average of almost $30 per hour, and two-thirds of them are in work. Their British counterparts make the equivalent of $20 and fewer than half are employed. This all looks more like the fruits of years of stronger growth than vocational education policy. We should view education as creating potential that a strong economy unleashes (and a weak one disappoints).

Takeaways by Macro Roundup® AI

  1. 30% of US adults have literacy skills typical of a 10-year-old, yet US workers scoring that low earn an average of almost $30 per hour and two-thirds of them are employed.
  2. British workers with similarly low literacy scores earn the equivalent of $20 per hour and fewer than half are employed, a gap the author attributes to years of stronger US growth rather than vocational education policy.
  3. The author argues that education should be viewed as creating potential that a strong economy unleashes and a weak one disappoints.

Related Articles:

  • Do Adults Have the Skills They Need to Thrive in a Changing World? — An international assessment of adult skills describes numeracy proficiency levels ranging from counting objects and adding small whole numbers at the lowest level, to extracting information from tables and graphs and performing basic arithmetic with money and percentages at Level 1, up to analysing complex mathematical information and critically evaluating whether data support a claim at Level 5.
  • Toward An Understanding Of The Returns To Cognitive Skills Across Cohorts — The authors find that the estimated decline in labor market returns to pre-labor-market cognitive skills for white men across two U.S. youth cohorts depends critically on the widening and increased left-skewness of the test-score distribution, with declines appearing only at the lower end of that distribution.
  • Cognitive Skills Beyond Childhood — Wages at age 50 rise more steeply with cognitive skills measured at age 16 than with cognitive skills measured at age 50; for women, moving from average to two standard deviations above average raises expected hourly wages from £11 to £22 using age-16 skills, versus £12 to £15 using age-50 skills.

AI Summary. In artificial intelligence, profit margins rise the further a company sits from the end customer, reversing the usual pattern in which owning the customer relationship commands the highest margins. The author argues the upstream profits are funded by capital raised by the loss-making consumer-facing layer rather than by cash generated from end demand.

Torsten Sløk Apollo
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AI profits have so far come only from the buildout itself, while the end-product generates losses. Slok notes that in the absence of revenue from models and applications, raising capital “can bridge the gap for a while, but not indefinitely.”

Are AI profit margins higher farther from the end customer?

Core argument: In the AI value chain, profit margins rise the further a firm sits from the end user, reversing the usual pattern in which the owner of the end-customer relationship earns the higher margin.

In business, profit margins are frequently higher for the owner of the end-customer relationship. But that is not the case for AI. In AI, profit margins are higher the further you get from the end user. This is important because it means the AI boom's profits are currently being funded by investors rather than earned from customers. The upstream margins are real, but they are paid for out of capital raised by the layer losing money, not out of cash generated by end demand. That makes the 41% contingent on the -59% continuing to be financeable. The bottom line is that the most profitable part of the AI value chain depends on the least profitable part continuing to grow revenue or raise capital.

Takeaways by Macro Roundup® AI

  1. In the AI value chain, profit margins rise the further a firm sits from the end user, reversing the usual pattern in which the owner of the end-customer relationship earns the higher margin.
  2. The AI boom's upstream 41% margins are paid out of capital raised by the layer losing money at -59%, not out of cash generated by end demand.
  3. The most profitable part of the AI value chain depends on the least profitable part continuing to grow revenue or raise capital.

Related Articles:

  • The State of the AI Economy — An analysis estimates the AI ecosystem generated $110bn in revenue over 12 months excluding double-counting, with the most recent month annualizing to a $175bn run rate. After separating AI-specific capital spending from the roughly $120bn hyperscalers already spent annually and depreciating compute over 6 years, revenues attributable to hyperscalers roughly cover depreciation.
  • AI: The ROI Runway Could Be Long Outside the Tech Sector — AI company valuations rest on the assumption that profit margins across non-tech firms will eventually rise, but outside a handful of sectors adoption is slow, creating a divergence between front-loaded valuations and slower cash flows. If the per-use costs of AI models converge toward zero, revenue may be insufficient for all major cloud providers.
  • A Slower AI Payoff Would Be Everyone’s Problem — If artificial intelligence profits arrive later than expected, committed capital spending and depreciation would still hit on schedule, squeezing margins, stretching balance sheets toward more debt and possible ratings downgrades, and repricing equities. Because a handful of large technology firms dominate the indices, the author argues the damage would spread to chips, power, data centers and the broader market.

AI Summary. The yen rose as much as 1.1% against a weaker dollar after a softer-than-expected US payrolls report, before trimming the gain to about 0.4% at 157.80 per dollar as the dollar rebounded. The move fueled speculation that Japanese authorities could again intervene to support the currency.

Mia Glass and Naomi Tajitsu Bloomberg
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Before today’s Yen rebound against the dollar on a weak US jobs report, the currency had surrendered roughly half of last week’s intervention-driven gains, raising the prospect of another round of coordinated US-Japan intervention.

Does weak US jobs data lift the yen against the dollar?

Core argument: The yen rose as much as 1.1% against the dollar after an unexpectedly soft US payrolls report, before the move faded as the dollar rebounded.

The yen surged against a weaker dollar after an unexpectedly soft US payrolls report on Friday, offering the latest fodder for speculation that authorities could intervene in the Japanese currency again. The currency rose as much as 1.1% against the dollar after the employment data. The move faded as the dollar rebounded, leaving the yen trading at 157.80 per dollar by 11:15 a.m. in New York, a gain of about 0.4%.

Takeaways by Macro Roundup® AI

  1. The yen rose as much as 1.1% against the dollar after an unexpectedly soft US payrolls report, before the move faded as the dollar rebounded.
  2. The yen traded at 157.80 per dollar by 11:15 a.m. in New York, a gain of about 0.4% against a weaker dollar.
  3. The soft US employment data fueled speculation that authorities could again intervene in the Japanese currency.

Related Articles:

  • The Real Message In The Yen Intervention — A US-backed intervention to support the yen was funded largely by selling euros rather than dollars, limiting the volume of dollar sales required. The author argues this signals that Washington, fearing the consequences for US financial markets, is reluctant to see foreign central banks deploy their dollar reserves in unlimited quantities.
  • Global Debt Report 2026 — Gross central government borrowing across OECD countries rose 7% to a record $17tn, about 23% of GDP, and is projected to reach roughly $18tn, or 24% of GDP. The United States and Japan account for close to 80% of the area's refinancing requirements, with the US share rising from 57% to 70%.
  • Shadow Government Bond Yields in the G10 — The author estimates "shadow" 30-year government bond yields for Germany, Spain, Italy, Greece and Japan — what long-term yields would be if central banks withdrew support such as Japanese government bond purchases and the European Central Bank's backstop facilities. These estimates assume no outright central bank selling, so they represent a lower bound on how high yields could go.

AI Summary. Japan's 30-year government bond yield spiked after the prime minister pledged to end "excessive" fiscal austerity, and the New York Federal Reserve followed within days with a "rate check" in currency markets to damp yen depreciation pressure. The author argues this reaction indicates markets are worried about Japan's fiscal position rather than simply trading reflation.

Robin Brooks Robin Brooks Substack
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Brooks argues that the markets’ reactions to Takaichi’s comments around “excessive” fiscal austerity support his view that “Yen depreciation is clearly about debt and yield suppression, which is something intervention can’t possibly hope to fix.”

Do rising long-term yields signal fiscal worries rather than reflation trades?

Core argument: Japan's 30-year government bond yield spiked on January 20, the day after Prime Minister Takaichi said her administration would end "excessive" fiscal austerity, illustrating market worry about Japan's fiscal situation.

The evening of January 19, Prime Minister Takaichi gave a speech in which she said her administration would put an end to “excessive” fiscal austerity. The next day the 30-year government bond yield spiked, a great illustration just how worried markets are about the fiscal situation in Japan. In fact, it was precisely this episode that saw the US wade into Japanese currency markets for the first time this year. The NY Fed did its infamous “rate check” on Jan. 23, i.e. in the days immediately after Takaichi’s comment. The US was clearly worried things were about to run out of control in Japan and decided to put a damper on Yen depreciation pressure. If markets were merely driving the Yen weaker as part of a reflation trade, they’d hardly react the way they did to Takaichi’s comment on ending “excessive” fiscal austerity.

Takeaways by Macro Roundup® AI

  1. Japan's 30-year government bond yield spiked on January 20, the day after Prime Minister Takaichi said her administration would end "excessive" fiscal austerity, illustrating market worry about Japan's fiscal situation.
  2. The New York Fed conducted a "rate check" on January 23, the first US move into Japanese currency markets this year, days after Takaichi's comment, to damp Yen depreciation pressure.
  3. The market reaction to Takaichi's fiscal comment argues against the view that Yen weakness is merely a reflation trade, according to the author.

Related Articles:

  • The Real Message In The Yen Intervention — A US-backed intervention to support the yen was funded largely by selling euros rather than dollars, limiting the volume of dollar sales required. The author argues this signals that Washington, fearing the consequences for US financial markets, is reluctant to see foreign central banks deploy their dollar reserves in unlimited quantities.
  • Global Debt Report 2026 — Gross central government borrowing across OECD countries rose 7% to a record $17tn, about 23% of GDP, and is projected to reach roughly $18tn, or 24% of GDP. The United States and Japan account for close to 80% of the area's refinancing requirements, with the US share rising from 57% to 70%.
  • Shadow Government Bond Yields in the G10 — The author estimates "shadow" 30-year government bond yields for Germany, Spain, Italy, Greece and Japan — what long-term yields would be if central banks withdrew support such as Japanese government bond purchases and the European Central Bank's backstop facilities. These estimates assume no outright central bank selling, so they represent a lower bound on how high yields could go.

Monday, August 10, 2026

AI Summary. Japan's consolidated public sector has liabilities of 255% of GDP, with asset purchases having shortened their duration and bank reserves at the Bank of Japan — floating-rate liabilities — worth 75.5% of GDP, down from 90.7%. Its largely unhedged 56%-of-GDP position in foreign securities and 50%-of-GDP equity holdings would take losses if the yen appreciates and real rates climb.

Hanno Lustig The Two Cents
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Japan’s public sector has “acted as the world’s largest currency carry trader,” borrowing short at below-market rates to buy foreign stocks and bonds unhedged. A rise in the Yen and/or Japanese rates would cause large losses on Tokyo’s balance sheet.

Is Japan's public balance sheet exposed to yen appreciation and rising rates?

Core argument: Japan's consolidated public sector has issued total liabilities worth 255% of GDP, and large-scale asset purchases have sharply shortened the duration of those liabilities.

The consolidated Japanese public sector has issued total liabilities worth 255% of GDP. The large-scale asset purchases have dramatically shortened the duration of those liabilities. Bank reserves held at the BoJ — floating-rate liabilities — are worth 75.5% of GDP in 2025Q3, down from 90.7% in early 2024. On the asset side, the public sector has a long position of 56% of GDP in foreign securities, largely unhedged. The massive depreciation of the JPY has provided a nice fiscal tail wind. As the BoJ raises short rates and lets the long end of the yield curve snap back, the appreciation of the JPY would cause large losses on the asset side. In addition, the public sector has another 50% of GDP invested in equities, long-duration assets that will be marked down as real rates climb.

Takeaways by Macro Roundup® AI

  1. Japan's consolidated public sector has issued total liabilities worth 255% of GDP, and large-scale asset purchases have sharply shortened the duration of those liabilities.
  2. Bank reserves held at the Bank of Japan, a floating-rate liability, stand at 75.5% of GDP in 2025Q3, down from 90.7% in early 2024.
  3. Japan's public sector holds a largely unhedged long position of 56% of GDP in foreign securities plus another 50% of GDP in equities, so yen appreciation and climbing real rates would generate large asset-side losses.

Related Articles:

  • Is Japan a Debt or a Currency Crisis? — Japan's 30-year government bond yield spiked after the prime minister pledged to end "excessive" fiscal austerity, and the New York Federal Reserve followed within days with a "rate check" in currency markets to damp yen depreciation pressure. The author argues this reaction indicates markets are worried about Japan's fiscal position rather than simply trading reflation.
  • Yen Intervention = US Self-Preservation — Japan's two traditional options for supporting a weak yen — much higher Japanese interest rates or large sales of dollars and US Treasuries — would both pressure US yields, as Japan holds about $1tn of Treasuries. US willingness to back Japan via its exchange stabilization fund and the Federal Reserve's international repo facility suggests officials see that risk.
  • Japan’s Debt Puzzle: Sovereign Wealth Fund from Borrowed Money — Japan's public sector operates as a highly leveraged sovereign wealth fund, funding risky assets by borrowing from banks and depositors at below-market rates, with returns sustaining its debt-to-GDP ratio above 200% without primary surpluses. The authors argue the resulting duration and currency mismatches expose Japan to mark-to-market losses that could trigger a fiscal crisis or a run on the yen.

AI Summary. Ten-year forward yields ten years ahead have risen across major advanced economies, not just the US, a global theme the author attributes to the debt buildup during the pandemic. The author argues economies have begun shifting from a good to a bad debt equilibrium, which he sees behind the rally in precious metals prices tied to a "debasement trade.

Robin Brooks Robin Brooks Substack
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Citing the growing number of fiscal “accidents,” from the 2022 collapse of the Truss government in the UK to ongoing depreciation pressure on the Yen, Brooks argues a global debt crisis is underway.

Are rising long-term yields a global story driven by pandemic debt?

Core argument: 10y10y forward yields have risen across key G10 economies, with the US not standing out, a pattern attributed to the global debt binge during the pandemic.

The chart shows 10y10y forward yields across key G10 economies. The US doesn’t even stand out in this perspective. Rising longer-term yields are a global theme and stem from the global debt binge that happened during the pandemic. There are multiple equilibria when it comes to debt, and it’s one of my big convictions that - in the years since the COVID pandemic - we’ve begun to shift from a good to a bad equilibrium. This is, in my opinion, why seemingly innocuous things like Powell’s dovish keynote speech at Jackson Hole a year ago sparked the absolutely insane rally in precious metals prices we saw last year. That “debasement trade” in my mind is all about markets seeing the writing on the wall when it comes to fiscal policy.

Takeaways by Macro Roundup® AI

  1. 10y10y forward yields have risen across key G10 economies, with the US not standing out, a pattern attributed to the global debt binge during the pandemic.
  2. The author argues that debt has multiple equilibria and that a shift from a good to a bad equilibrium has begun in the years since the COVID pandemic.
  3. The author attributes the rally in precious metals prices after Powell's dovish Jackson Hole keynote to a "debasement trade" reflecting markets' view of fiscal policy.

Related Articles:

  • Are Government Bonds Safe in Times of War and Pandemic? — Government bonds severely underperform in wartime, in absolute terms and relative to equities, housing, and economic growth, unlike in financial crises when bonds tend to outperform stocks. The U.S. and U.K. reduced war-driven debt-to-GDP ratios without explicit default, using surprise inflation and financial repression that shifted fiscal burdens onto bondholders.
  • Global Debt Report 2026 — Gross central government borrowing across OECD countries rose 7% to a record $17tn, about 23% of GDP, and is projected to reach roughly $18tn, or 24% of GDP. The United States and Japan account for close to 80% of the area's refinancing requirements, with the US share rising from 57% to 70%.
  • Across The Rich World, Fiscal Crises Loom — An analysis estimates most rich countries could keep debt stable as a share of their economies with only small primary surpluses—Britain's required surplus is 0.3% of GDP—even if all debt were refinanced immediately at current rates, but the tightening needed to stabilize debt ratios exceeds 2% of GDP in Britain and America and 3% in France.

AI Summary. In a guaranteed income experiment, the gap between participant income and total household income fell by roughly $1,700 per year, which the authors attribute to lower earnings among other household members. Net transfers to extended family rose by about $135 per year, while measures of household stability, decision-making, and division of labor clustered near zero.

Elizabeth Rhodes, David Broockman, Eva Vivalt, Patrick Krause, et al. National Bureau of Economic Research
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In a randomized guaranteed-income experiment, giving one adult a transfer of $1,000/month for two years cut the other household members’ income by ~$1,700/year. Partners worked less and advanced less at work, while schooling and training among others rose.

How does guaranteed income affect other household members' earnings?

Core argument: In the guaranteed income experiment, the gap between participant income and total household income fell by about $1,700 per year (s.e. $800), a decline that appears to reflect lower earnings among other household members.

Figure 4 summarizes treatment effects on the standardized family-level indices. The transfers’ effects reshaped the income and employment of other household members. The gap between participant income and total household income fell by about $1,700 per year (s.e. $800). The decline appears to reflect lower earnings among other household members. Effects on employment outcomes are consistent with this interpretation. Partner promotions and transitions to better jobs decrease significantly, but these effects are very small in magnitude. Partner hours and employment show more meaningful declines but are not significant in the unconditional analysis. Several other measures provide supporting evidence of negative effects on labor supply. Net transfers—the value given [to extended family] minus the value received—increased by roughly $135 per year. Estimates for household stability, decision-making, and the division of labor cluster near zero.

Takeaways by Macro Roundup® AI

  1. In the guaranteed income experiment, the gap between participant income and total household income fell by about $1,700 per year (s.e. $800), a decline that appears to reflect lower earnings among other household members.
  2. Partner promotions and transitions to better jobs decreased significantly but were very small in magnitude, while partner hours and employment showed more meaningful declines that were not significant in the unconditional analysis.
  3. Net transfers to extended family—value given minus value received—rose by roughly $135 per year, while estimates for household stability, decision-making, and the division of labor cluster near zero.

Related Articles:

  • The Impact of Unconditional Cash Transfers on Parenting and Children — In a randomized trial, parents receiving $1,000 per month in unconditional cash for three years spent more on their children monthly and reported better parenting behaviors, such as closer supervision, than parents receiving $50 per month. The transfer had no meaningful effect on most educational outcomes, the home environment, child food security, homelessness, or parental satisfaction.
  • The Impact of Unconditional Cash Transfers on Consumption and Household Balance Sheets: Experimental Evidence from Two US States — In a randomized experiment giving 1,000 individuals $1,000 per month, the authors estimate spending rose in most categories, most for housing, food, and car expenses, along with increased housing moves. Debt rose steadily to $1,600 higher by the study's end, and estimated net worth effects turned to roughly -$2,800.
  • The Employment Effects of a Guaranteed Income: Experimental Evidence from Two U.S. States — In a randomized experiment, 1,000 low-income individuals received $1,000/month unconditionally for three years while a control group of 2,000 received $50/month, and the transfers reduced individual income excluding transfers by about $1,500/year. The authors find no significant effects on human capital investment and conclude the transfers produced a moderate labor supply reduction not offset by other productive activities.

AI Summary. Companies in the S&P 500 outside the technology sector are spending heavily on artificial intelligence without showing gains in profit margins, with health care margins halved since 2015, consumer staples near 6%, and consumer discretionary near 8%. So far the artificial intelligence capital spending boom appears in sellers' margins rather than buyers'.

Torsten Sløk Apollo
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To this point the AI buildout is only showing up in sellers’ margins, not the buyers’. Sløk warns that the “longer it takes the S&P 493 to generate ROI, the bigger the downside risks to an economy and a market this concentrated in the AI trade.”

Are AI buyers outside tech seeing any margin gains?

Core argument: Health care profit margins have halved since 2015, while consumer staples remain stuck near 6% and consumer discretionary near 8%, despite heavy AI spending across the S&P 493.

The S&P 493 is spending heavily on AI, but it is not showing up in profit margins. Looking at the individual sectors of the S&P 500 outside tech shows that the picture is flat, cyclical, or worse. Health care margins have halved since 2015; consumer staples are stuck near 6%, and consumer discretionary near 8%; energy and materials have given back most of their 2022-23 gains; real estate is going sideways; and the only genuine improvements look like an ordinary cyclical recovery rather than a technology-driven step change. The bottom line is that the AI capex boom is so far only showing up in the sellers' margins, not the buyers'.

Takeaways by Macro Roundup® AI

  1. Health care profit margins have halved since 2015, while consumer staples remain stuck near 6% and consumer discretionary near 8%, despite heavy AI spending across the S&P 493.
  2. Energy and materials have given back most of their 2022–23 margin gains and real estate is moving sideways, with the only genuine improvements outside tech resembling an ordinary cyclical recovery rather than a technology-driven step change.
  3. The AI capex boom is so far showing up only in the sellers' margins, not in the margins of the companies buying AI.

Related Articles:

  • The Summer I Turned Pretty — A warning sign in a boom cycle is when companies closest to final demand weaken while capital spending beneficiaries keep thriving, as when telecom operators' shares rolled over while communications equipment stocks kept rising. Semiconductor stock prices and free cash flow are soaring while large cloud providers' shares stagnate and their free cash flow plummets.
  • A Slower AI Payoff Would Be Everyone’s Problem — If artificial intelligence profits arrive later than expected, committed capital spending and depreciation would still hit on schedule, squeezing margins, stretching balance sheets toward more debt and possible ratings downgrades, and repricing equities. Because a handful of large technology firms dominate the indices, the author argues the damage would spread to chips, power, data centers and the broader market.
  • The Market Is Asking Questions — Markets are weighing whether the trillions committed upfront to AI data centers, chips, and power will generate returns above the cost of capital before those assets depreciate. With the buildout increasingly funded by debt rather than internal cash flow and borrowing spreads widening, financing costs could rise until new data-center spending no longer clears its return hurdle.

AI Summary. China cut crude oil imports by half, or 5.5m barrels a day, without a corresponding economic slowdown, a decline experts estimate shaved $30 or more off the global Brent benchmark price. This ability to switch oil demand on and off lets the world's largest oil importer move prices much as OPEC does through output control.

Economist Staff The Economist
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China cut crude imports by ~5.5mm b/d btw February and June, likely reducing Brent prices by ~$30. The scale of China’s oil reserves enabled the country to reduce imports without demand destruction.

Can the world's largest oil importer move prices like OPEC?

Core argument: China cut crude imports by half, or 5.5m b/d, between February and June, a drop experts reckon shaved $30 or more off Brent, the global benchmark.

Between February and June, China slashed its crude imports by half, or 5.5m b/d—enough, experts reckon, to have shaved $30 or more off Brent, the global benchmark. That is more than half of the worldwide decline during the covid-19 lockdowns, when global demand collapsed by 9m b/d. And in contrast to the pandemic, when the world economy slid into recession, China’s GDP has chugged along just fine. It has not been buying less foreign crude because its economy is suffering. This ability to turn oil demand on and off, ostensibly at low economic cost, allows the world’s biggest oil importer to move prices just as OPEC and its allies have long done through their control of half of global output. 

Takeaways by Macro Roundup® AI

  1. China cut crude imports by half, or 5.5m b/d, between February and June, a drop experts reckon shaved $30 or more off Brent, the global benchmark.
  2. China's 5.5m b/d import cut exceeds half of the worldwide 9m b/d demand collapse during covid-19 lockdowns, yet China's GDP has kept growing rather than sliding into recession.
  3. China's ability to turn oil demand on and off at ostensibly low economic cost lets the world's biggest oil importer move prices much as OPEC and its allies do through control of half of global output.

Related Articles:

  • China’s Energy Security Doesn’t Run Through Hormuz but Through the Electrification of Everything — China's energy security rests on coal rather than imported oil and gas: the country consumes more than half the world's coal, and coal powers its industry and electricity system. Coal consumption has risen since 2022, with roughly 95GW of new coal capacity added in one year, exceeding Vietnam's entire installed electricity capacity.
  • Fighting Words: The Energy Transition in 2026 — Estimates based on primary energy overstate how much electricity is needed to replace oil in passenger cars, since electric motors convert 80%-90% of electricity into motion versus about 18% for gasoline cars. Measuring useful final energy net of waste heat avoids this "primary energy fallacy": the US consumed 45 exajoules of useful final energy versus 95 exajoules of primary energy.
  • Power Politics: Energy Self-Sufficiency in a Modern Mercantilist World — China leads in adding power to the grid, with more than 30,000 miles of ultra-high-voltage transmission lines versus zero in the US and lead times for large transformers of 48 weeks against a US average of 143 weeks. This positions China to accommodate new demand sources such as artificial intelligence.