China decided to raise the prices of gas and diesel by 18% last week. The theory is that this will cut into demand and help drive down the global price of oil. It will also save China money. The central government underwrites that cost of fuel by buying crude at high prices and selling the refined products below market.
Keeping fuel costs low is part of what allows the GDP in China to keep growing quickly. The country needs to move goods from the interior of the country ,where they are made, to the port cities for shipping. China's export success has some base in a low cost of shipping.
The China plan might work in the U.S., although it would risk harming many of the lower and middle class. The federal government has the opportunity to raise the taxes on gas and diesel enough to move the price of a gallon of "regular" to over $6. That would certainly cut consumption.
Or, the government can do nothing because gas may get to $6 all on its own.
Douglas A. McIntyre is an editor at 247wallst.com.
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Reader Comments (Page 1 of 1)
6-21-2008 @ 5:36PM
Shaun said...
Boy is that true, we will see $6 gas no matter what happens. I think it is getting to a point where we need to find alternative energy. Gas just isn't going to work out much longer with increasing prices and diminishing supplies.
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6-21-2008 @ 9:01PM
Brendon said...
Spell check on the title
6-21-2008 @ 9:33PM
Chuck Barlow said...
Go to Newts webpage Drill Now and sign his petition, the Government wants us to have a weeken economy so we are forced to merge with Canada and Mexico to beome the North America Union and switch to the Amero for its currency, this has been in the making for along time.
Drlling now and not stopping is the only thing that will persuade the Arabs to drop their prices, they have done us wrong, they set us up for this fall, while the drilling is taking place and refineries being built, research other fuel sources and technologies and do not beleive the hype of the government saying it will take 12 years, we put cities up in a year!
6-21-2008 @ 11:06PM
Drae said...
Prices are going up all over. Everyone forgets about the people most affected by this, the consumers.
As a consumer you have to make sure you are using the least gas possible with your car until other alternatives open.
Here is a link to help you get the most MPG. It can boost mpg up to 30%.
http://www.raysebookshop.com/catalog/make-that-pump-frown-p-87.html
6-22-2008 @ 2:19AM
Bruce said...
OPEC sells oil for $136.00 a barrel.
OPEC nations and China buys U.S. grain at $7.00 a bushel.
Solution: Sell grain for $136.00 a bushel.
Can't buy it? Tough! Eat your oil!
Ought to go well with a nice thick grilled filet of camel ass!!!
6-22-2008 @ 10:32AM
Speculator said...
Gas prices are going higher. Demand is out stripping supply. But right now oil is cheap,
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6-22-2008 @ 3:20PM
CrossProfit said...
Wow!
A 17% increase in gas prices brings the price up to $3.00 per gallon. So when we pay $4.00, in China it's $2.55. When we pay $4.50, in China it's $3.00.
No wonder why the U.S. can't compete with China! Energy costs is a primary manufacturing cost input. The way this works: defacto the U.S. is subsidizing the Chinese economy. The more we buy from China, the more they can afford to subsidize energy costs, the more manufacturing is moved from the U.S. to China.
It's a vicious cycle but it seems to be working just fine - for China that is.