Today’s NYT features an article about U.S. problems as a result of foreign fuel subsidies. From “Fuel Subsidies Overseas Take a Toll on U.S.“:
From Mexico to India to China, governments fearful of inflation and street protests are heavily subsidizing energy prices, particularly for diesel fuel. But the subsidies — estimated at $40 billion this year in China alone — are also removing much of the incentive to conserve fuel.
In most countries that do not subsidize fuel, high prices have caused oil demand to stagnate or fall, as economic theory says they should. But in countries with subsidies, demand is still rising steeply, threatening to outstrip the growth in global supplies.
It’s a good, basic illustration of the global ripples that government interference in the economy can generate.