Text 28680, 87 rader
Skriven 2007-05-07 10:12:00 av Jeff Binkley (1:226/600)
Ärende: Gas prices
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http://biz.yahoo.com/cnnm/070504/050407_gas_demand.html?.v=1&.pf=family-home

CNNMoney.com
Where gasoline is cheap, and why it's making yours pricey
Friday May 4, 3:12 pm ET

By Steve Hargreaves, CNNMoney.com staff writer



In Saudi Arabia gasoline costs about 45 cents a gallon. In Iran it's 33.
Venezuelans pay under a quarter.
These absurdly low prices are a direct result of massive government subsidies.

While these numbers are not adjusted for cost of living, it's fair to say that
drivers in those countries are getting a good deal.


But it's straining government budgets. More importantly, it's not allowing the
free market to do its job. Higher prices on the open market are not leading to
a drop in demand, which is keeping the cost of oil high for everyone else.

"Roughly two-thirds of new oil demand is coming from countries that have
subsidized oil markets," said Christopher Ruppel, a senior geopolitical analyst
with the consulting firm John S. Herold. "So demand is not going to be affected
if oil goes from $60 a barrel to $80."

By no means does this let motorists in the Untied States off the hook. Gasoline
consumption in this country has been rising even faster than normal, around 2.5
percent annually over the last couple of months, despite average prices over $3
a gallon, close to an all-time record.

But countries where consumption is rising the fastest may be surprising.

With it's white hot economy, it's no surprise China tops the list. The
country's oil demand is projected to grow 7.5 percent this year, according to
statistics provided by Ruppel.

Ruppel said China still has gasoline subsidies, although lately the government
has been trying to whittle them back. The average price for a gallon of gas in
Beijing is $2.44 a gallon, according to the research group AIRINC, which
provided all the gasoline price numbers in this story.

But the second highest demand growth isn't in the fast growing economies of
India or Brazil. It's Saudi Arabia, projected to consume 5.6 percent more oil
next year, according to Ruppel.

Iran is number three, guzzling 3.3 percent more.

Russia and Egypt, which Ruppel said both have heavy gas subsidies, are also
high on the list.

And the raw numbers aren't small either. The Saudis used over 2 million barrels
of oil per day in 2006, and the Iranians used 1.7 million. India, a faster
growing economy with far more people, used 2.5 million. (By comparison, the
U.S. used about 24 million barrels a day, nearly 10 times as much as India
despite having a population nearly four times as small and an economy just
three times bigger.)

"Maybe it's adding up," said Lou Pugliaresi, president of the Energy Policy
Research Foundation.

Pugliaresi said his group hadn't done any particular studies on subsidies and
how they relate to worldwide demand growth and prices, but added "There are
places where it's serious, and some of those populations are big enough to make
a difference."

Katherine Spector, head of energy strategy at J.P. Morgan, said the bank did a
study on price supports and demand a couple years back. Not only was demand
rising fastest in countries that had subsidies, it also greatly scaled back
once the subsidies were reduced, such as in Thailand and Indonesia.

"A subsidy tells consumers they don't need to adjust their behavior," said
Spector.

Of course, subsidies are just one factor contributing to high oil and gas
prices, noted Adam Sieminski, chief energy economist at Deutsche Bank.

Sieminski pointed to all the the other reasons why oil prices are high, among
them rapid worldwide economic growth, limited supply and not enough refining
capacity.

But, he added "to the extend that it creates demand, it's helping push prices
higher for everyone."

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