China's Trip to our 1970s

China raises prices of oil, electricity

Check out the picture of the gas station. It is what you get when you remove price controls that can't work long-term.

Cars queue up in front of a gas station to buy as much of fuel as possible before oil prices are hiked at midnight in Beijing June 19, 2008. China announced Thursday evening that gasoline and diesel prices would be hiked by about 18%.

The government was forced to raise oil prices from midnight last night, the first time in eight months, because of the soaring price of crude in the international market.

1979 energy crisis

Check out the picture of the gas station. It is what you get when you remove price controls that can't work long-term.

The Carter Administration began a phased decontrol of oil prices on 5 April when the average price of crude oil was US$15.85. Over the next 12 months the price of crude oil rose to $39.50 (its all time highest real price until May 7th, 2008[7]).

The price of gasoline was $0.706 in March 1979. It peaked at $1.352 in March 1981.

During this period domestic U.S. oil output rose sharply from the large Prudhoe Bay fields while oil imports fell sharply.

Something tells me we won't quite be so lucky this time, even with China finally throwing some of the price control towel into the ring.

Further, that's just one more cost Chinese companies are going to need to absorb when attempting to send us cheap goods. If there's something you've been eyeing at Wal-Mart, there are probably worse times to buy/hoard it.

From the top link:

It doesn't end with oil. Electricity is also going up.

The increase in power tariff will not create a big impact on the CPI because urban and rural residents have been exempted.

If urban and rural residents won't absorb the cost, who will? Somebody surely must pay.

Perhaps this would be a bad time to point out that we are not Chinese urban and rural residents. Or is that just stagflationary nonsense too?

Source Data:
EIA: Historic Gasoline Prices