China Will Raise Fuel Prices

June 19, 2:25 PMGlobal Warming ExaminerJohn Ryden

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Our market economy has been sending us price signals that gasoline, diesel, and jet fuel are all becoming scarce. Higher prices should cause an increase in production and a decrease in demand to make supply and demand balance at a market price. When a large country like China subsidizes fuel prices, it distorts this self correcting market mechanism. Because demand stays constant, prices can be driven much higher. By letting Chinese consumers feel the pain of higher prices, they should adjust their demand downward. This should allow the market to find a new equilibrium at a lower price point.

I don’t expect prices to decline very much, but this will help. The biggest change might be in market sentiment, which will affect the speculators in the market. Now we just need to get our political leaders to understand the supply side of the equation and allow more drilling in this country.