It IS a classic case of economics 101, as you say. The oil refiners here are taking it on the chin so the govt can keep cheap oil feeding the economy and maintaining their precious “social harmony”. The CCP are under constant and enormous pressure to keep that economy ticking along just to keep creating jobs for the rural-urban migrant workers, new job-seekers and those workers thrown on the scrapheap after their inefficient state-owned ‘iron rice bowl’ factories closed.

Thailand’s PM Thaksin tried the same thing last year (subsidizing oil) and it nearly bankcrupted the country. In China’s case, it’s happened extremely quickly, i.e. the country has gone from a net exporter of oil to the second largest consumer after the States in only a few years. The govt are in a very, very precarious situation if oil prices either continue to rise or even just hover around the US$50 mark.

If they can’t get the oil companies to agree to keep losing money, economic collapse is a real possibility. The population simply will not accept higher petrol prices. Any large rise in prices will almost certainly result in social upheavel—(the CCP’s biggest nightmare). This oil price bubble only needs a pinprick to burst it and the collapse of China’s economy would do very nicely.

Oh, and by the way. I’m smiling too.

Martyn – Peking Duck guest blogger.

If you wish to be taken seriously when you’re making a comment, please note that trotting out the “war for oil” meme is a weak foundation on which to build a cogent point.

The underlying cost of U.S. fuel is the same as it is in many other first world countries, the price we pay at the pump for gasoline is less because we choose to tax it less than in most of those countries. Market pricing is the best regulator of demand and when prices rise, people begin driving less, choosing other vehicles and otherwise conserving. It also stimulates investment in alternate fuels and technology. No one needs to be upset over someone else’s choice of vehicles or what they feel builds prestige. The particular combination of goods each of us spends our money on reflects our own view of the world, honest people may differ in what makes up their own ideal world and which goods should be sacrificed or maintained. We each feel more or less pain as our choices prove wise or foolish, we learn, we adjust.

My point about the Chinese was they tried to avoid market realities and now have shortages, … economics 101. Those artificially low prices increased demand beyond what it would otherwise have been and we all paid the price until they finally faced reality because their economy couldn’t absorb the difference between world markets and centrally planned prices indefinitely. I don’t believe there was any complaint about fuel prices in my post.

GM, Toyota and all of the other companies will make their own decisions about what products to build. No need to laugh or gloat or complain or anything else. The results will reflect how well they planned and executed those plans. All of the new developments in hybrids, fuel cells, electrics and biodiesel will change the mix each year. I think it looks like an exciting time and I can’t wait to see what comes next.

the states consumes so much more fuel in a “fuel buying binge” fuelled by “cheap gas prices” in a “government controlled world”

china has not recently invaded any countries for control of oil…

i love the high gas prices. it makes all the people chasing “prestige” by buying suburbans and navigators look so hypocritical! you look more prestigious by driving something with that kind of fuel economy! STOP COMPLAINING ABOUT THE PRICE OF FUEL!!! u.s. fuel is cheaper than in nearly any “first world status country” and if u.s. consumers respond by buying the biggest they can, the sooner it ends, the better. nice work on banning the smart cars, too. (smart!)

i remember laughing at g.m. when they stuck all their eggs in the truck basket, and when they said hybrid was not worthwhile tech…

R.I.P. GMC… do you think toyota enjoys your lunch?