Eliminating Subsidies For Domestic Petroleum

China's leaders, nonetheless, have shown concern about the country's dependence on oil, at least on oil that is imported, and China has implemented strategies to address its mounting demand for oil and inability to meet this demand fully with its own oil production. China has kept domestic petroleum affordable for its citizens by subsidizing it. As a result, the demand for cheap domestic fuels just keeps increasing. A series of state-mandated price increases was instituted in an effort to raise the price of China's oil to a level more closely reflective of the world oil price and shake off some of the domestic demand. However, this effort proved insufficient to keep China at pace with the world oil market; in fact, demand for Chinese exports of certain petroleum products increased in the first half of 2005 as the gap between domestic prices and world prices widened.13 However, the Chinese government (unlike the U.S. government) has lately expressed intentions to eliminate subsidized prices altogether.

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