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China to hike oil prices, risk slower growth
Cars queue up at a Chinese petrol station ahead of the price hike in Beijing on March 19, 2012. China hiked fuel prices by the biggest margin in nearly three years after a surge in the cost of global crude, the government and state media said.
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Stacey Vanek-Smith: Chinese Markets took a dive this morning after the country announced a decision to raise the price of gas by as much as 7 percent. Investors worry that could put a damper on economic growth.
From Shaghai Rob Schmitz reports.
Rob Schmitz: In China, the government sets the price of oil. Energy companies have pay market prices for crude, but often have to sell at a loss. The government compensates them with subsidies. And those subsidies come directly from the pockets of the people through taxes. Tsinghua University Economist Michael Pettis says pricier gas will help tackle China’s growing wealth gap.
Michael Pettis: Those who have cars will be negatively impacted, but there you can think about it as a transfer thing: the ones with cars tend to be wealthier. So it has a double impact: it reduces the hidden tax on the household sector and it has a wealth transfer effect from the people with cars to the people without cars.
Schmitz: But pricier gas will effect everything that’s bought or sold, so won’t that mean higher inflation?
Pettis says yes, but because China’s inflation rate has slowed this year, he thinks the impact will be minimal.
In Shanghai, I’m Rob Schmitz, for Marketplace.
Do you know what everyone has not even thought of when it comes to why gas prices are high and probably going to remain high for a long, long, time? Its called" equal political leveraging". It does not matter who is in the White House. Both Parties are using the prices of oil, gas, etc. to serve their own purpose. Be it political, economical, or just wanting to increase the Federal Revenue holding accounts.
True,however, The Fed Reserve woill even stick their tendicales into the fray just for the sake of controlling inflation. Right now, the U.S. debt and the debt of other nations will play havoc with global oil prices. We have seen this in uprisings and with nations using subsudies to off set their economic growth agendas.
