Rest easy my American friends. Our worries of one day reporting to our Chinese and Indian overlords are over. We don’t have to fret about these folks ever taking control of the world. They can’t afford it.
We’ve all noticed how the price of oil seems to have a direct correlation with our happiness. That’s because our economy relies on the black gold for so much. Our bad. Thankfully we aren’t the only ones that rely on it to figuratively and actually fuel our economy. The last 50 years has really seen the emergence of southeast Asia as a global power. We all know about China and India, but the smaller nations like South Korea and Thailand are also big exporters of talent and product. If you think it hurts us when oil goes up, imagine what its like for them.
We can afford this expensive oil. As it stands now, many of these counties benefit from oil subsidies provided by their government. These aren’t small either. In April alone, one of China’s biggest oil importers received $1 billion (US$) in kickbacks from the government. This means the average Chinese citizen is not paying the full price of oil that we must pay. This also means that the more expensive oil gets across the globe, the more the government must give to their oil companies.
At some point the price of oil will reach a tipping point for these countries, the governments will have to cease these subsidies. Some have already started.
Now that is Malaysia, think about China and India. Those countries have prospered because of the cheap oil and still rely on the low price for their growth. If they were to start paying what we pay for oil their consumption would be drastically cut. Its the simple matter of not being able to afford the real price.
Their economies stumble, inflation will get out of control, and many will revert back to 2nd world economics instead of 1st world. Since most of those countries’ citizens still live like its the 3rd world, its easy to imagine this happening.
How does this help us ‘Mericans? We’ll see tomorrow.
 By The Weakonomist |
The Weakonomist is the founder of Weakonomics. Clicking the picture of the puppy will tell you more about him. If you like what you're reading consider subscribing to the blog, following him on Twitter, and checking out the related posts below. Please consider a donation if you really enjoy Weakonomics. Also keep in mind that nothing I say can be construed as financial advice. |
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