Friday, May 30, 2008

Foreign oil demand heavily subsidized

naked capitalism points to an important story regarding global oil markets:


"Ambrose Evans-Pritchard in the Telegraph argues that the days of many of those subsidies are numbered:
One by one, countries across Asia and the Middle East are being forced to abandon price controls on fuel and energy, bringing hundreds of millions of consumers face to face with the true market cost of oil. The effect has already begun to chip away at world demand and may ultimately trigger a slide in crude prices."

The fact that it is only now that foreign governments are bringing "hundreds of millions of consumers face to face with the true market cost of oil" really needs to be brought to the attention of the US public and policymakers. While improved energy efficiency remains an important goal for the US, the lack of incentive for consumers in these other countries to be more energy efficient has obviously been an important driver of demand. I expect that foreign demand will drop off sharply as these subsidies are eliminated, relieving demand pressure and thereby some of the price pressure, as the Telegraph writer states.

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