China Will Increase Gas Pricesby Tim Manni
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.