How World Subsidies On Oil Helps To Destabilize The World

Fuel Subsidies Overseas Take a Toll on U.S. -- The New York Times

JAKARTA, Indonesia — To understand why fuel prices in the United States have soared over the last year, it helps to talk to the captain of a battered wooden freighter here.

He pays just $2.30 a gallon for diesel, the same price Indonesian motorists pay for regular gasoline. His vessel burns diesel by the barrel, so when the government prepared for a limited price increase this spring, he took to the streets to protest.

From Mexico to India to China, governments fearful of inflation and street protests are heavily subsidizing energy prices, particularly for diesel fuel. But the subsidies — estimated at $40 billion this year in China alone — are also removing much of the incentive to conserve fuel.

The oil company BP, known for thorough statistical analysis of energy markets, estimates that countries with subsidies accounted for 96 percent of the world’s increase in oil use last year — growth that has helped drive prices to record levels.

Read more ....

Update: China's Cars, Accelerating A Global Demand for Fuel -- Washington Post

My Comment: My years of experience have always thought me one thing when it comes to markets being manipulated by Governments .... there is always a crash. I do not know when this crash will happen (if I did I would be a billionaire by now), but there will be a point when governments cannot keep a market condition in an artificial environment. They will just run out of money.

When governments make the decision to stop price supports for energy (because they have no choice), the oil price escalation will curtail demand in many of these third world nations. There will be riots and the toppling of governments .... a price that everyone will pay when this happens. But when this happens, the drop in demand will help to bring the price of oil down ..... and the cycle starts all over again.

Governments are always worried about security and stability .... and they are all aware that energy is the linchpin to this security. Unfortunately ..... as we can see by the policies that are being adopted by the majority of countries in the world today ..... these measure are only good for the short term, and when looked at the bigger picture they will never bring security and stability.