High oil prices force cut in Asia fuel subsidies

[fedsron2us]

Philippine civil servants are to enjoy longer weekends from next week, thanks to soaring oil prices.

The government has shortened its official working-week from five to four days for the next two months to reduce energy demand, as part of a desperate attempt to lower its 300,000 barrels a day of oil imports.

“The current high prices of oil in the world market make it imperative that we conserve energy and the government has to head the way in its effort,” explained Raphael Lotilla, energysecretary. Manila's move is the lastest sign of mounting concern among developing countries, in particular in Asia, over the sharp rise in oil consumption in a climate of high crude prices.

In contrast with Europe and North America, where market forces are imposing discipline in oil consumption, most developing countries strongly subsidise fuel and electricity. This insulates citizens from the rise in oil prices, but hinders any slowdown in demand. But with oil prices cresting $55, some developing countries are now adopting their first conservation measures. In the past two weeks, five Asian countries, including China, have increased the price of state-subsidised petrol and diesel prices in a bid to curb consumption.

http://news.ft.com/cms/s/7d9f1f44-a2e3-11d9-b4e8-00000e2511c8.html

The level of state subsidies on energy in Asia surprised me. With this level of support plus low labour costs it is hardly suprising that industries and jobs have been sucked so rapidly from the West to the East. Cheap energy for consumers also helps to suppress the demand for higher wages from workers . If higher oil prices cause these props to be removed then some of the advantages that the Asian economies have enjoyed over the USA and Europe are going to disappear. Of course there are commentators who think that the US government want higher crude oil prices for just that reason

http://www.lancasteronline.com/pages/news/local/4/13108

[cliss]

1. I'd like to see that happen in the US.....

Now emerging economies have to be super-careful with their petroleum consumption, but in the US, we still sit on our fat asses and drive Hummers & SUV's.

The Phillipines consumer 300,000 barrels of oil per day. Compare that with the US's consumption of 20 MILLION BARRELS PER DAY.

My (humble) prediction: the world will ONCE AGAIN show how frugal they can be. They will quit driving so much, conserve, come up with all kinds of ways to cut back. Europe will do the same, in fact they already are extremely fuel-efficient.

These countries will come out ahead because of their conservation efforts. Their companies will be more profitable as the oil supply goes downward. Meanwhile, the U.S. will still be fat, lazy and unable to cope with the new game plan.

[fedsron2us]

2. Yes Asia does only consume a fraction of the oil used by the US

but the point the article is trying to make is that Americans could make huge energy savings by just driving more fuel efficient cars etc. High oil prices will eventually effect US citizens behaviour just as they did in the 1970's. At the moment most Asian consumers do not use fuel efficiently because the cost is kept artificially low by state subsidies. The spike in oil prices means that this support may not be sustainable. The removal of these subsidies is not going to be easy and its impact on Asia is likely to be destabilising. Higher fuel cost have already led to street protests in Indonesia and Malaysia

http://www.thecouriermail.news.com.au/common/story_page/0,5936,12620319%255E1702,00.html

http://www.atimes.com/atimes/Southeast_Asia/GC10Ae04.html

I suppose the key question I would like answered is whether the hike in crude prices is the first sign of the long predicted Hubbert Peak of world oil production or are they being manipulated as part of some geopolitical strategy to undermine the rise of the Asian economies and to maintain the hegemony of the US dollar. Many people on the DU believe the former to be the case. I am not so sure that the peak has arrived. The large increase in the oil stockpiles of US over recent weeks would normally have caused the price of crude to ease. This makes me think that other forces are at play.