Comments on: India Cuts Gasoline Subsidies

By: Lune

Lune — Thu, 05 Jun 2008 19:55:00 +0000

I like how the communists are proposing a windfall profits tax when the oil companies are going bankrupt from the subsidies. With economic reasoning like that, it’s no wonder they don’t like capitalism

On a more serious note though, India has a difficult problem. While subsidizing diesel for cars/scooters is stupid, there is an economic and social case for subsidizing fuel used for cooking and other tasks (e.g. kerosene), especially for the poor. We in the U.S. do this with, for example, assistance programs for heating oil and natural gas in the winter months.

Unfortunately, undertaking comprehensive subsidy reform during a crisis like this isn’t politically easy. But perhaps the impending annihilation of their domestic oil industry and destruction of their federal budgets will finally focus their minds…

By: Yves Smith

Yves Smith — Thu, 05 Jun 2008 18:48:00 +0000

The shortages are recent and due in part to hoarding by end users.

By: Anonymous

Anonymous — Thu, 05 Jun 2008 17:42:00 +0000

Could this potentially increase demand? Your article noted that many gas stations have no gas to sell. So no gas is selling. If the subsidy is lowered, yes, people will pay more. But how much demand has been stiffled due to lack of supply? Seems to me you could see demand increase as availability increases from zero, no? You are selling zero volumes at lower prices and now could sell more because higher prices will create the incentive to supply more.

By: Anonymous

Anonymous — Thu, 05 Jun 2008 16:17:00 +0000

I wonder how low the salaries in the US should fall for us to be competitive with the EM economies. Our workers have no subsidized oil, health care, child care. We have to comply with the environmental regulations. The salaries should fall 50% below of what they are in EM countries. IS it where we are going?

By: Anonymous

Anonymous — Thu, 05 Jun 2008 14:43:00 +0000

The idea that EM economies could have significant GDP growth while importing large amounts of oil is quickly fading. The impact on growth and standard of living will be severe and long lasting. The spot light will turn to Japan as it’s export market and Asia manufacturing base decline.
Large importers of oil all face the same issue of lower standard of living for its citizens and the resulting political fall out.

By: rent_to_own

rent_to_own — Thu, 05 Jun 2008 08:09:00 +0000

I think the term subsidy needs to be somewhat more carefully used, as was the case here, when talking about India.

But Saudi Arabia does not 'subsidize' fuel - it merely sells what it produces internally at a price lower than can be found somewhere else.

At this point, the term 'free market' has frequently come to mean 'sell me what I want at the price I offer.' Which traditionally has been the perspective of the well off when competing against the not well off in the market place.

But countries like Saudi Arabia or Brasil or Venezuela do not have to sell to us at a price we determine - they can simply use it themselves, for their own purposes, while we say they are subsidizing the cost of fuel, mainly because they are forgoing the profit of not selling it to us. In dollars - who says we don't have a sense of humor?

That they are using their own oil for reasons which don't meet our standards is the problem which 'subsidy' encompasses - our standard being, we want to burn it first.