Going Green

Monday, July 28, 2008

Overseas Fuel Subsidy Impact on U.S. Economy

Fuel subsidies create an artificial intersection of the Supply and Demand curves in many foreign markets. Theoretically, they stimulate the Demand side of the equation. This means less fuel available for the U.S. market -- affecting our Supply side of the equation and thus pushing prices higher. I suspect that the impact to removing such subsidies would be negative to the U.S. economy -- not positive. The reason I believe this is that the subsidies help to stimulate economies of countries such as China and Indonesia. Their strong economies increase demand in areas other than fuel. Their growth can be our opportunity if we will take advantage of it.

Fuel Subsidies Overseas Take a Toll on U.S.

Published: July 28, 2008

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.

“If the government increases the price...(complete article here).

No comments: