China SUV sales rise as government foots bill

No one in the U.S. can afford an SUV because the gas is too expensive. But in Beijing, they are driving through the streets in Navigators and Hummers.

The news is a perfect tale of the differences in the two countries. According to the FT, "many of the new buyers of SUVs in China are more interested in social status than miles per litre." That misses the point.

In China, the central government still underwrites the cost of gas and diesel by allowing the country's oil companies to buy crude at $130 a barrel and not pass the cost along to consumers and businesses. The government writes a check to make up the difference for its large oil firms. By doing this, China allows its economy of trucking and car sales to flourish. In the U.S., people can barely afford gas.

The broader and more disturbing story is that as long as China is willing to keep gas cheap, consumption will continue to rise. That is likely to help keep crude high.

The fellow sitting in the big SUV by Mao's tomb is pushing up the price of oil, even if he doesn't know it.

Douglas A. McIntyre is an editor at 247wallst.com.