Estimating the dynamic economic impacts of oil supply disruptions on China: A case study of Malacca Strait block

Abstract

The intensification of geopolitical conflicts necessitates formulating economically effective coping strategies, which requires scientifically understanding the economic losses caused by oil supply disruptions and their evolutionary patterns. However, current assessment results are mostly static and cover direct losses, which are inadequate to fully support the development of disaster prevention measures. Therefore, considering the interdependence across different sectors, we employed a Dynamic Inoperability Input-Output Model to assess the economic impacts of a 20% disruption in oil imports through the Malacca Strait, lasting for 90 days. The main findings are as follows: (1) 2% of a sector's inoperability caused by oil supply disruption will, on average, be transmitted to other sectors due to their interdependencies. (2) The disruption will result in total economic losses of 62.7 billion yuan for China, and 70% of the total economic losses were incurred within the first 30 days. (3) To cope with the adverse economic impacts of oil transport disruption in the Malacca Strait, the optimal range of China's strategic petroleum reserve is 47.91–169.55 million barrels.