China To Kill Gas Subsidies?
Paul Eisenstein of The Car Connection's Industry Insider blog thinks that China's going to cut the fuel subsidies that have insulated the Middle Kingdom from rising gas prices. Prices for gas have risen only nine percent since January 2007, compared to the nearly 80 percent jump suffered by American drivers in the same period. With the Chinese paying about $2.60 per gallon of unleaded (the exception to China's love affair with all things leaded), demand is still rising in China, with 1,300 new cars hitting the road every day in Beijing alone. So when will China make the much-needed subsidy cuts? Eisenstein joins the growing consensus that suggests the bitter medicine will be administered sometime after the Olympics, when China will be basking in global PR afterglow. With neighboring developing economies recently cutting fuel subsidies (Indonesia, Malaysia, Sri Lanka, Taiwan and India), the International Herald Tribune reports that the such cuts are necessary across the board to help keep global oil prices from spiraling out of control. With the International Energy Agency taking up the fight against subsidies, expect pressure to mount on China to end incentives for fuel consumption. Eventually.