by Fons1 via FlickrAfter long internal debates, China has used the drop in world oil prices to introduce a fuel tax. In the China Economic Quarterly (CES), here republished by the Financial Times, Arthur Kroeber analyses the new tax.
Rising dependence on imported oil is one of the main reasons for this major policy change, Kroeber writes, but there is more:
Another factor is the increasingly messy economics of China’s oil refining business. Through 2004, when oil prices were still fairly low, China’s net crude oil supplies reliably ran about 500,000 barrels per day ahead of the apparent demand for refined oil products – gasoline, diesel, fuel oil, jet kerosene, etc.
But as crude prices rose from 2005, crude supply fell behind apparent product demand to the tune of about 200,000 barrels per day, mainly because the country’s pricing system created incentives for stockpiling.
Arthur Kroeber is a speaker at the China Speakers Bureau. When you are interested in his input in the China-debate, do get in touch.