Oil tumbled this morning after China said they are set to raise gas and diesel prices by 1,000 yuan ($145.39) per tonne tomorrow. Analysts fear that this move will slow demand growth from the world’s second largest oil consumer and drive prices down. But they couldn’t be more wrong!
My opinion: If China cuts subsidies and effectively raises energy prices, that’s NOT going to quell demand. Exactly the opposite. It’s going to increase demand as consumers in China begin to expect rising prices and start buying in anticipation that prices will be even higher down the road! That will increase demand even more.
That’s not to say oil is going to head straight up here. A pullback is overdue.
Related posts:
- Chinese oil demand expected to increase 5.7% … Yesterday the International Energy Agency (IEA) raised its forecast for global oil demand in 2009 and said it expected...
- China Accelerates Filling Up Its Oil Reserves Jan 5, 2009 (WALL STREET JOURNAL) — As the U.S. seeks to stockpile oil, China has been doing the same,...
- On-the-ground in Asia … Right now I’m on a tour through Asia and judging by what I’m seeing here, there are very few signs...
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Silver is NOT a monetary, financial metal. It is an industrial metal that underperforms during recessions. Moreover, contrary to what many analysts are saying, there is no shortage of silver. And silver demand is lackluster to say
the least. My recommendation: Stick with gold. Period.