Sunday, July 27, 2008

Fuel Subsidies fuel growth

Fuel Subsidies Overseas Take a Toll on U.S. - Great article. Fuel is subsidized in India, Indonesia, and China. Per a report by BP, 96% of oil usage growth was in countries with subsidies. And the cost to the government? China and India may be able to afford it, but can Indonesia? The argument is to prevent rioting, subsidies are required. But of what cost to the entire economy? If the government is spending money on oil, that could be better used for improving the economy? Would targeted subsidies help? For commercial transportation? This would encourage less usage by part of the economy that don't help growth.
My guess is the subsidies will continue, since this is the easiest to do. It solves the immediate problem, but does not focus on what is best long term.

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