Fuel Economy: Overseas Oil Subsidies Take A Toll On US Market

To understand why fuel prices in the United States have soared over the last year, it helps to talk to the captain of a battered wooden freighter here.

Photo courtesy Kemal Jufri/Imaji, for The New York Times
Freighters in Jakarta run on diesel, kept cheap by subsidies. Subsidizing nations make up nearly all the growth in oil demand.

Without a kerosene subsidy, one economist says, many Indians would turn to wood for cooking.

He pays just $2.30 a gallon for diesel, the same price Indonesian motorists pay for regular gasoline. His vessel burns diesel by the barrel, so when the government prepared for a limited price increase this spring, he took to the streets to protest.

"If the government increases the price of fuel any more, my business will collapse totally," said the boat captain, Sinar, who like many Indonesians uses only one name.

From Mexico to India to China, governments fearful of inflation and street protests are heavily subsidizing energy prices, particularly for diesel fuel. But the subsidies -- estimated at $40 billion this year in China alone -- are also removing much of the incentive to conserve fuel.

The oil company BP, known for thorough statistical analysis of energy markets, estimates that countries with subsidies accounted for 96 percent of the world's increase in oil use last year -- growth that has helped drive prices to record levels.

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Comments

[SteveRuyle]

We could do away with our subsidies and make foreign subsidies not matter if we simply modified all future gas leases. Allow them to drill, but modify the terms of the lease to say that every drop of oil, every cc of natural gas, every last product that comes from federal land, may only be sold in the USA. None of it can be sold overseas. This will ensure that we actually get the resources that are there, and that it is not merely an asset grab that we get nothing from. If they dont like the terms, they dont have to buy the lease.

[Merg]

Do people realize that America is actually Exporting oil at this time!

http://budz.wordpress.com/2008/07/15/us-oil-firms-seek-drilling-access-but-exports-soar/

What is that all about??

[research]

What about the US 158B$ per year oil subsides?

Aren't we holier then thou.

[mouselion]

Haven't we been told how lucky we are -- we've enjoyed lower gas prices than most of the world (or what!)? Now this comes out -- human never want to stop scapegoating (as if *we* could afford these countries to just cut off their fuel subsidies!)

[KillTheMessenger]

Hmmm... one wonders what other nations think about farming subsidies in the US.

Yet another article that starts out whiny and completely fails to address the real problem: we are an energy hog caught in a supply-demand trap. Now we are asking Indonesia to conserve so we can keep driving our SUVs for cheap? Please. Give me and yourself a break.