Common Tragedies

Thoughts on Environmental Economics

China energy policy fact(s) of the day

Posted by Daniel Hall on December 18, 2008

China cut fuel prices for the first time in almost two years after crude oil slumped, seeking to reduce costs for companies and factories as the economy enters its deepest slowdown in almost two decades. The ex-factory price of gasoline was lowered by 14 percent to 5,580 yuan ($816) a metric ton, diesel by 18 percent to 4,970 yuan and jet fuel by 32 percent to 5,050 yuan.

The cuts look consistent with a policy which is more focused on industrial support than strictly subsidies for end users (note the larger decreases for jet and diesel fuel).  Also, at the same time:

A plan to increase fuel consumption taxes was also approved, the commission said. The gasoline consumption tax will rise to 1 yuan a liter from 0.2 yuan and the levy on diesel will climb to 0.8 yuan from 0.1 yuan. Taxes on other fuel products will increase too, the commission said without giving details. The government is raising fuel consumption taxes to replace road maintenance fees to encourage energy conservation.

Here is the source.  This mix of wholesale fuel subsidies combined with end-use taxes seems to me to scream, “black market in fuels!”

Is China leading or following with this policy? The same article concludes:

Vietnam reduced gasoline prices four times in October to curb inflation. Malaysia has cut fuel costs five times since June. Indonesia may lower gasoline prices next month.

Oy.  Not good.

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