DR. MOBIUS AND THE OIL PRICE RISES
It hardly seems a week has passed since our seminar with Dr. Mark Mobius. As well as the excellent attendance we also had a good amount of post event press coverage including television, radio, print and web. And not just from within Thailand.
One of the many interesting things Dr. Mobius said was that governments should suspend fuel subsidies because that in itself will reduce the current high demand for oil. Fewer people would be able to afford fuel and therefore look more seriously for alternatives.
What do you think?
3 comments:
only the extremely wealthy can pimp a white suit and still have everyone pay attention to him. -Patiwat
It's his trademark. And yes, you have to be truly respected to be able to carry it off. Good luck to him.
Well, consider Iran. They subsidize petrol because they import almost all their supply, in spite of their status as an oil exporter. Because they have a basically centralized economy, there is no economic incentive to build the refineries needed for their fuel consumption. Recently they had to ration petrol because they could no longer afford to subsidize petrol. They are building new refineries as fast as they can, but can't keep up with the demand for petrol.
So the choice is either draconian rationing, which upsets people and gives them a specific target to vent their anger, or putting the market to work, where supply and demand regulate one another through price, and people can lower the price by reducing demand.
The unfortunate problem with oil is that the commodities market, designed to regulate wide price fluctuations caused by temporary shifts in supply and demand, is actually worsening the problem by becoming too "wildly irrational" (to coin a Greenspan turn of phrase).
So yes. I would agree. And would spread it to nearly everything that is currently subsidized. Subsidies can work to achieve short term goals. But in the long term they become liabilities.
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