interestrateripoff Posted February 21, 2011 Share Posted February 21, 2011 http://www.bbc.co.uk/news/business-12520643 China has raised fuel prices for the second time in three months as it looks to offset a jump in global crude costs.However, the move has raised questions over government attempts to slow inflation. China, which subsidies the cost of fuel, increased the price of wholesale petrol and diesel by $53 (£34) per tonne from Sunday. Further price rises may be needed if the cost of oil keeps rising on the international market, analysts said. Instability in the Middle East has raised concerns about supply, and the price of oil has climbed to more than $100 per barrel. Capping demand China's National Development & Reform Commission (NDRC) said that the price rise was needed to slow demand for oil and fuel in China. "Excessively fast growth in oil consumption is exceeding the tolerance capacity of our country, economically and environmentally," the NDRC was quoted as saying by the Reuters news agency. "Therefore there is an urgent need to give play to the role of price levers for adjustment and guidance, constraining the excessively fast growth of oil consumption," it added. China's latest price increase works out at 4 cents per litre of petrol and 5 cents per litre of diesel. It would appear the global inflation genie is well and truly out of the bottle. I'm sure the Ben Bernanke isn't trying to force China to revalue the yuan by forcing them to pay more dollars for oil. One final inflationary price spike before the collapse? Quote Link to comment Share on other sites More sharing options...
aa3 Posted February 21, 2011 Share Posted February 21, 2011 The marginal utility of oil is much higher in the developing nations right now too. I was reading how in western nations the marginal barrel of oil translates to around 1000$ of GDP. But in developing nation it is more like 4000$ of gdp for that same barrel. The reason is a barrel of oil in Britain is likely to be used by an environmentaly concious couple on an eco-trip to Brazil. Whereas in the developing world it is more likely to be used in farm equipment, construction, transport, etc.. To make a long story short, China and other developing nations can simply bid higher if they need more oil. Quote Link to comment Share on other sites More sharing options...
fellow Posted February 21, 2011 Share Posted February 21, 2011 Won't this lower oil prices outside of China? Quote Link to comment Share on other sites More sharing options...
interestrateripoff Posted February 21, 2011 Author Share Posted February 21, 2011 The marginal utility of oil is much higher in the developing nations right now too. I was reading how in western nations the marginal barrel of oil translates to around 1000$ of GDP. But in developing nation it is more like 4000$ of gdp for that same barrel. The reason is a barrel of oil in Britain is likely to be used by an environmentaly concious couple on an eco-trip to Brazil. Whereas in the developing world it is more likely to be used in farm equipment, construction, transport, etc.. To make a long story short, China and other developing nations can simply bid higher if they need more oil. And how much of said marginal utility of oil in the developing nations is down to product consumption in the west via debt? Not too sure on your assumption that they can just bid higher especially when there own domestic populations have to pay for it, that marginal utility might diminish rather quickly. Quote Link to comment Share on other sites More sharing options...
caparn Posted February 21, 2011 Share Posted February 21, 2011 The marginal utility of oil is much higher in the developing nations right now too. I was reading how in western nations the marginal barrel of oil translates to around 1000$ of GDP. But in developing nation it is more like 4000$ of gdp for that same barrel. The reason is a barrel of oil in Britain is likely to be used by an environmentaly concious couple on an eco-trip to Brazil. Whereas in the developing world it is more likely to be used in farm equipment, construction, transport, etc.. To make a long story short, China and other developing nations can simply bid higher if they need more oil. I read somewhere that 1 barrel of oil will do the same amount of work as 21,000 man hours. So from that point of view it's still really good value. Quote Link to comment Share on other sites More sharing options...
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