I just tripped across an almost textbook case of lying through statistics. This one's from the PRC and it's a brazen attempt at minimizing how the PRC is a major contributor to the world's oil crisis.
Oil is usally measured in barrels (32 barrels to the US gallon) and priced in dollars, the PRC raised the allowable sell price on gasoline 300 yuan per ton (most likely metric ton) at the retail level. It sounds impressive but let's move that back into the currency that oil gets traded in and it's $37.50. How many barrels in a metric ton? It depends on the specific gravity of gasoline. here's how to do the calculation for crude oil and plugging in this page's figure for vehicle gasoline (0.74 instead of 0.88) you get 8.5 barrels of gasoline per metric ton. Divide the price increase of $37.50/8.5 and you get $4.111 rise per barrel and $0.129 per gallon increase.
Prior to the hike, gasoline was $43 a barrel which translates to $1.344 per gallon ($0.355 per liter). After the price hike we're all the way up to $1.473/gallon ($0.389 per liter) at a price set by the State. Great gasoline prices, if you can get them.
So who can get them? Certainly the people of the PRC can get them and so can the businesses relocating to the PRC. The energy subsidy is an important factor in relocation considerations, especially as labor costs in the PRC are rising.
Now it's obvious that the PRC government can't subsidize gasoline costs to this extent forever. It's also obvious why the market for gasoline isn't reacting normally. There's at least one huge, inefficient, market participant that is choosing to subsidize the price of gasoline to the point where there is greatly reduced pressure to improve efficiency and cut demand.
Now here is a WTO complaint I can really get behind. 40%-50% retail gasoline subsidies supplied by the state is a huge government subsidy that distorts economic relationships across the board and makes economically profitable operations that should simply not be in business. The longer that it goes on, the worse the eventual crash is going to become. The PRC is now large enough that we're going to feel that crash when it comes. The only question is when and how.
Posted by TMLutas at April 24, 2006 01:02 PM