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Gold/Mining/Energy : Big Dog's Boom Boom Room
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To: profile_14 who wrote (102320)6/8/2008 9:42:50 AM
From: GaAs52  Read Replies (2) of 206166
 
Calculation for oil subsidies:

Profile, I think your calculation needs revision.

"Assuming this year's average price is double last year's average price ..."

The cost of subsidies does not double with the doubling of oil prices. It increases much more since their share of the actual cost is not the same with the doubling oil prices.

Assuming the percentage of subsidies is 30% of the actual cost for the last year, and assuming no domestic price increase (like in China now) this year, the doubling of oil price will indeed increase subsidies by ~4 times, making it $220 B.

And tripling of the oil price ($200/b) will increase the subsidies (assuming no domestic price increase), by ~7 fold making it $400 B, which will consume China's reserves very quickly in a few years.
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