Wednesday, June 4, 2008

What's Really Pushing Gas Prices? Subsidies.

At its hearings Tuesday on "energy market manipulation" (no assumptions of innocent till proved guilty, there), the U.S. Senate's Commerce committee was champing at the bit to regulate, well, anything really that had to do with oil trading.
clipped from
Several of its witnesses dutifully pointed the finger at oil market speculators, though billionaire financier George Soros provided a reality check on how effective regulating them would prove (see "Soros Tells Congress To Pop An Oil Bubble").
Half the world's population benefits from energy subsidies, which translates into a quarter of the world's gasoline production, they say in a note to clients. Though three-quarters of the world's gasoline consumption is taxed, those taxes vary hugely around the world, resulting in a spread of prices at the pump from five cents a liter in Venezuela to $2.70 a liter in Turkey. (It is about $1 a liter in the U.S.)
At the end of 2006, when oil was trading at $60 a barrel, only 10.4% of the world's gasoline consumption was taxed. That has now risen to 22%, Jen and Bindelli calculate, and oil has similarly more than doubled in price.
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