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China to Discourage Gas Consumption
I noted in my recent comment on asset allocation toward cash, it would make sense to the Chinese governement to discourage gas consumption. Well, it seems they are doing just that. The following was reported today in The Gartman Report and elsewhere:
“We note this in light of a decision announced today in
Beijing wherein China will raise the consumption tax on
high-emission passenger vehicles and will cut the
consumption tax on low-emission passenger vehicles as
part of efforts to conserve energy. This is simple; this is
elegant and this is wise.
From September 1st onward, the consumption tax rate on
passenger vehicles with engines larger than 3 liters to 4
liters will rise to 25% from 15%, while that on cars with
engines of more than 4 liters will go to 40% from 20%.
On the other hand, the consumption tax rate on
passenger vehicles with an engine size of 1 liter or less
will fall to 1% from 3%. The Communists seem to
understand economics better than Washington, and we
applaud Beijing for this simple, elegant and proper way to
adjust demand downward.” [emphasis by JK]
Tags: peak oil energy investments
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3 responses so far ↓
1 paultaut // Aug 15, 2008 at 10:24 pm
The idea is to make it onerus to operate cars with high gas consumption rates. It would work here but only if applied to future sales. The people in our economy cannot stand another Tax, especially the middle class which was enticed into buying these types via “no money down and 0% APR” in just the last 5 years.
Now, what can be done here today would be sticker shock, increase the Federal sales taxes on similar vehicles to 25% or more.
While I applaud the Chinese effort, I believe it may have the opposite effect in China. There is no more obvious way to showcase your new wealth to your friends and neighbors than to buy a vehicle everyone knows is more expensive to operate.
Whether one calls it Status or Face, this environment still exists in Asian countries.
2 Robert Essian // Aug 16, 2008 at 3:36 pm
Jim, I applaud the Chinese for this initiative too but unless their buying flex fuel or electric cars and trucks it will not have the desired effect as they think it would.
It will be their only option (internal combustion engine) though because they don’t have the electrical capacity to charge their cars.
More people will probably buy cars now because smaller cars are cheaper.
It is estimated that 100 million Chinese can afford to buy a car and not many have as of yet.
That’s a lot of oil still.
I’m cocerned that this will eat into the anticipated (near term) oil glut we have coming on.
3 Steve // Oct 7, 2008 at 4:23 am
China has wisely chosen to cut back on subsidies, which will have the effect of further raising gasoline prices. This move, along with drastic reduction in consumption in the U.S. has caused oil and gasoline to escalate their market corrections.
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