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June 19th, 2008 (Modified on June 26th, 2008)

China Will Increase Gas Prices



It’s not well known that China subsidizes the cost of gasoline paid by its citizens. That’s why this article matters:

China, the world’s second largest oil consumer, will increase retail gasoline and diesel prices by 1,000 yuan ($145.50) per tonne from Friday, according to industry sources.

Fuel subsidies have helped propel China’s demand and supported a six year rally in crude oil rally that has sent prices up nearly seven-fold.

That’s just a small fraction of the subsidy, but nonetheless, oil prices fell by $3 per barrel following this announcement. Will it help reduce the price at US gas pumps? That remains to be seen — but one of the reasons for the runup was vastly increased demand from China (among other countries). If the laws of economics hold, reduced demand for a commodity should affect the price.

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HSH.com's daily blog focuses on the latest developments in the mortgage and housing markets. Our mission is to relate how changes in mortgage rates and housing policy, as well as the latest financial news, impacts consumers, homebuyers and industry insiders alike. Our 30-plus years of experience in the mortgage industry gives us an edge as we break down the latest changes in an ever-changing market.

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Tim Manni is the Managing Editor of HSH.com and the author of their daily blog, which concentrates on the latest developments in the mortgage and housing markets.

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