A key fact here from BP, via the New York Times:
From Mexico to India to China, governments fearful of inflation and street protests are heavily subsidizing energy prices, particularly for diesel fuel. But the subsidies — estimated at $40 billion this year in China alone — are also removing much of the incentive to conserve fuel.
The oil company BP, known for thorough statistical analysis of energy markets, estimates that countries with subsidies accounted for 96 percent of the world’s increase in oil use last year — growth that has helped drive prices to record levels.
In most countries that do not subsidize fuel, high prices have caused oil demand to stagnate or fall, as economic theory says they should. But in countries with subsidies, demand is still rising steeply, threatening to outstrip the growth in global supplies.
The article goes on to report that while Malaysia caused no end of annoyance to its citizens when it hiked petrol prices by 40 per cent at the start of June, it was before this spending 7.5 per cent of economic output on fuel subsidies – more than anywhere else on earth. (Indonesia is next, at 4 per cent.)
