Thursday, August 18, 2005

China & Oil Demand

If you’re wondering why gas is around $3 per gallon, take a look at this post at Gateway Pundit:


That is not a pretty picture. How would you like to be in a mile long line for over an hour waiting to fill-up your tank?

China’s demand for oil is one of the primary reasons that gasoline prices across the world have increased. The oldest and truest of economic principles at work, that being “Supply & Demand”.

The problem for China is that they are still a communist country and the oil industry is still owned by the government and does not operate in a true free market like a lot of other things in China.

If gas prices rose in China to $3 per gallon via a free market, the line in the picture would be much shorter, due to decreased demand at that price. But at $1.50 a gallon in China because of the government subsidizing the cost, demand remains, well look at the picture for a visual definition of “STRONG”……………………

China is afraid that allowing gas prices to move higher will slow their economy, which is probably true, but there a definite issue with the current model as well…………….