China’s Economy is Running Out of Gas: Update

Tuesday, November 27, 2007 1:48
Posted in category The Big Picture
Comments Off on China’s Economy is Running Out of Gas: Update

Last month, lines at the pumps started to form as a gas shortage and fuel tax hit the market. It was a topic I covered in the post China’s Economy is Running Out of Gas… Literally, and I have seen a number of newspaper and TV based reports on the problem since.

as part of his comment on that post, Jay Boyle wrote:

Allow the invisible hand of the free markets to set fuel prices. Today the Chinese government sets the prices and as a result we see fuel shortages as the national fuel companies would rather re-sell their stocks on the international market then sell it below their production cost domestically

and this is something that this Reuters article covered in their recent release China says fuel rationing halted in some regions

While, learning of the increased committment that Sinopec and PetroChina are showing to the Chinese economy by forgiving profits from exporting the PetroChina needs, I have to wonder if anyone learned anything at all from the California energy crisis in 2000.

Secondary to that, I think we are seeing where China is caught between a rock and a hardplace.  On one hand, they cannot raise prices too fast (to market) becuase of inflationary concerns… while on the other, they cannot keep the prices artifically low as oil companies are for profit entities and will continue to export for higher profit.

So, for the record.  when you are in a market economy, and you are going to deregulate something.  It really is best to deregulate everything.  Restricting the prices a supplier can charge to the market creates false market pricing that will in the end not serve anyone.

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