The People's Republic once slashed crude imports and drew from strategic stockpiles during the Strait of Hormuz crisis. Now, diesel shortages have sent shockwaves through the US and European economies. Global diesel supply is tight because refineries are running at full capacity, with Russian output offline due to attacks.

China possesses ample spare refining capacity, possessing more refineries than needed for domestic needs before the current crisis. However, Beijing is unlikely to flood the market with profitable diesel. The government's strategic priority is rebuilding depleted buffers, and it holds significant influence over refiners' activities.

Chinese refiners are currently producing 2.3 million barrels a day fewer than last February. While adding this capacity back could generate roughly $25 billion annually in gross refining margins, a $10-per-barrel increase in crude prices would wipe out those commercial gains. China imported 8.4 million barrels a day in July.

Therefore, expecting a "deus ex Sina" to rescue the diesel market is foolhardy. Investors driving up refiner stocks should note that incentives can change, and China's idle capacity is a policy choice, not a necessity.