
NEW YORK (CNNMoney.com) — For months we’ve been hearing how gasoline subsidies or value controls in places like China and India are artificially fueling demand there. Being that oil is a global supermarket, rising demand overseas is one reason prices possess risen here in the U.S.
Those subsidies are rarely being trimmed, as soaring crude prices dote on it increasingly difficult for governments to foot the note. In recent weeks China, India, Indonesia, and Iran - countries where the regime sets the fee of gas - have all raised prices.
But nowadays analysts disagree on what effect this will have, with some saying that gas consumption - and worldwide oil prices - could actually go up. They say that higher gas prices could give refiners an incentive to make more gasoline and eliminate the shortages that have plagued places like China.
"Their lifestyle as changed so much for the better, it’s not going to thrust them that much if gas prices go up 20%," said Nauman Barakat, an energy trader at Macquarie Futures, the trading arm of Macquarie investment bank. "They are willing to pay more so they don’t have to wait in line."
Others agree with Barakat that claim and prices are unlikely to decline.
"Actual consumption is unlikely to be affected seriously," analysts at Wood Mackenzie, and energy consultancy, wrote in a research note. "As long as China’s overall husbandry remains strong, significant evolution in vehicle ownership will more than offset the negative effects of this appraisal rise."
Others say these theories aren’t plausible and the loaded prices devise undoubtedly crimp demand.
The price of gas
Gasoline is a relatively similar product and costs about the same to produce anywhere in the world.
To get the "true price" of gasoline, the price without taxes or subsidies, one could take the current U.S. price - about $4.09 a gallon - and treacherously gone the 40 cents or so we suffer the consequences in taxes, said Bill Veno, an oil analyst at the consultancy Cambridge Energy Research Associates. That leaves a "market amount" of about $3.70.
Some countries customs gasoline to death, and break off up with a much higher retail price. In England a gallon of gas goes for $8.60, according to numbers provided by Vena. In Belgium it’s $9.04. In the Netherlands it’s nearly $10.
But in other places - whether it’s to jolt the economy of placate a restless population - gas is much cheaper than the market rate. In Saudi Arabia it’s 45 cents. The Venezuelans pay just over a dime.
According to the International Monitory Fund, 46 countries had sacrifice subsidies in 2008. Most are either in Asia or the Middle East.
Barring Iran - which lacks refineries, needs to import gasoline and recently raised its drain prices from 30 to 38 cents a gallon - there’s little chance most counties in the Middle East will eliminate their subsidies anytime soon. These high oil prices have left them flush with cash.
But Asia is a different story. The Asian countries generally have bigger populations, and are usually net importers of oil. For them, price subsidies are a pricey proposition.
The Chinese recently hiked prices from about $2.82 to $3.29 a gallon, according to various media reports. India also raised prices, although remains equitable about 30 percent not worth market rates.
Thailand, Vietnam, and South Korea acreage all thought to be considering a gas price hike.
"The bill is just getting too big," said John Kilduff, an force analyst at MF Global in New York.
Kilduff thinks rising fuel prices in Asia will limit demand, and puissance ultimately lower prices worldwide.
"Those customers just don’t have the durability U.S. customers do," he said. "It’s customary to have a real thrust on them."
Cambridge’s Veno agrees.
"These subsidies artificially protect consumers from the high price of oil," he said. Eliminating them "would have almost an immediate effect to curtail demand."
Over the next few months, we may get to catch a glimpse of just who in this debate is right.
Gas prices be dressed climbed to CD levels. Are you feeling the pinch? Tell us how gas prices are affecting you and what you’re doing to cope. Send us your photos and videos, or email us to share your epic. First Published: July 2, 2008: 2:48 PM EDT