As Oil Price Sets New High, Stress Hits Developing Nations; Fuel Shortages, Unrest Spur Beijing to Act; Market Turning Point?

• Published in: The Wall Street journal. Eastern edition
• Main Author: Shai Oster in Beijing, Patrick Barta in Bangkok and Russell Gold in Austin, Texas
• Format: Newspaper Article
• Language: English
• Published: New York, N.Y Dow Jones & Company Inc 01.11.2007
• Edition: Eastern edition
• Subjects: Consumption; Crude oil; Crude oil prices; Demand; Demonstrations & protests; Developing countries; Diesel fuels; Economic growth; Energy industry; Energy prices; Gasoline prices; Government subsidies; LDCs; Oil consumption; Service stations; Subsidies; China
• ISSN: 0099-9660

Yesterday's step thus came as a surprise, but doesn't go far enough to cure China's basic problem. If China doesn't fully liberalize fuel supplies and let prices rise, it could face even-worse energy-supply bottlenecks. Tuesday's queue-jumping killing may offer a preview of the social unrest that long waits at the pump could spur. Rising oil prices could yet derail the still-booming Asian economy. Countries there have widely used fuel subsidies to spur strong economic growth. But cheap fuel also distorts demand and discourages consumers and industry from being efficient. The McKinsey Global Institute, the consulting company's economics-research outfit, estimates that "ending fuel subsidies worldwide would cut demand for transportation fuels by three million barrels a day." That's equal to roughly 3.4% of daily use. Some big players are suffering, too. Earlier in the week, Sinopec said it was under "tremendous" pressure from the rising prices. "We will try the best to ensure a stable supply of fuel in the market, but it's a big challenge for us," Sinopec's chief financial officer, Dai Houliang, told reporters Monday.