Word: crude
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...than massive exports as does China's. But there's nowhere to hide from higher oil prices, and several factors make the crunch particularly painful in Asia. The vast majority of countries in the region are net importers of oil. Only Malaysia and Vietnam are able to produce enough crude to be net sellers. In addition, several Asian governments for years have spent billions of dollars subsidizing fuel costs to keep it cheap for their poor and often quarrelsome citizens. But oil is now so expensive that subsidies and price controls are increasingly impossible to maintain. Over the last...
...regardless of the intentions of politicians, subsidies and price controls tend to produce unintended consequences. They distort normal consumption patterns and subvert the law of supply and demand. When oil supplies are low and crude prices rise, consumption falls, bringing prices back down as demand and supply balance out. But if consumers are insulated from the market, paying an artificially low price for fuel, they tend to use as much or even more - which strains supplies further and forces oil prices even higher...
Soon after the first long-distance pipelines were laid in the Northeast in the late 1870s and early 1880s, the first oil tankers were allowed to pass through the Suez Canal, and the modern shipping system was born. Today crude oil travels in tankers that can carry up to 4 million bbl. With daily world demand at about 85 million bbl., petroleum represents about a third of all international cargo. And even though the commodity is also measured in kiloliters (in Japan) and metric tons (in Russia), thanks to whiskey, the units are always converted to the 42-gal. barrel...
...Fast-forward now to 2003. In that year, crude oil cost a little more than $30 per barrel.3 Since then, crude oil prices have increased more than fourfold, proportionally about as much as in the 1970s. Now, as in 1975, adjusting to such high prices for crude oil has been painful. Gas prices around $4 a gallon are a huge burden for many households, as well as for truckers, manufacturers, farmers, and others. But, in many other ways, the economic consequences have been quite different from those of the 1970s. One obvious difference is what you don't see: drivers...
...efficiency was less the result of government programs than of steps taken by households and businesses in response to higher energy prices, including substantial investments in more energy-efficient equipment and means of transportation. This improvement in energy efficiency is one of the reasons why a given increase in crude oil prices does less damage to the U.S. economy today than it did in the 1970s...