Asia to cut subsidies as oil hits $135 Asian governments on Thursday moved to cut energy subsidies to protect their finances and those of state-owned energy companies in the face of soaring oil prices. As crude oil pushed through $135 a barrel for the first time, Taiwan, Malaysia and Indonesia announced plans for urgent action to free prices or cut subsidy costs. China denied rumours of an imminent increase in retail prices, but may relax price controls.
Asian governments on Thursday moved to cut energy subsidies to protect their finances and those of state-owned energy companies in the face of soaring oil prices.
As crude oil pushed through $135 a barrel for the first time, Taiwan, Malaysia and Indonesia announced plans for urgent action to free prices or cut subsidy costs. China denied rumours of an imminent increase in retail prices, but may relax price controls.
Now that would be a major, major policy change. A welcome one, but a momentous one, with lots of potentially nasty politicla consequences. In the long run, we're all dead. John Maynard Keynes
That's the real problem with rising oil prices. IMHO, developed countries will do relatively fine. For those countries, oil is a relatively small part of the economy overall and changing the infrastructure to adapt will not be such a great ordeal, assuming somewhat competent leadership : synfuel, EVs, rail, etc. If the popular will is there, it can go very fast. I see no problem at a 100% transition out of oil then fossil carbon in less than 15 years.
But for intermediate economies like a good chuck of Asia, the story is very different. Just developed enough to use a lot of oil and have western-style expectations of standards of living, not developed enough to invest in more capital-intensive solutions. They need to go for solutions that give them the biggest short-term bang for their buck, solutions which are also the most fuel intensive. And they depend on high growth to maintain their political stability...
However, I imagine at some point within the next year or two the Chinese may feel obliged to recognise this may not be their wisest long-term policy and re-direct themselves. however, given their failure of water and pollution policy where the commuunist command structure actually frustrates such initiatives, I wonder how succesful they may be. An expensive lesson is in store. keep to the Fen Causeway
"The bitterness of low quality remains long after the sweetness of low price is forgotten."
This was the motto of an electronics system company for whom I was briefly employed in Los Angeles. I often think of it when the only product locally available for a particular need is Chinese made. I have been burned a number of times: radios with so little sensitivity they will only pull in the strongest local stations, (think radio gospel), tee shirts with seams that unravel after the second wash and I won't even start on lethal pet food, children's toys, etc.
I wonder if "It is glorious to be rich" is an adequate ideological basis upon which to build an economy. The Chinese Government does respond to the most embarrassing disasters, sometimes with public executions. That seems like a rather blunt instrument with which to deal with a complex economy. As the Dutch said while fighting the Spanish: "It is not necessary to have hope in order to persevere."
