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February 28, 2005

Notes: Oil and Geopolitics

Brad Setser writes:

Brad Setser: The Saudis indicated that they really don't mind $50 a barrel oil. Shocking, I know. The Saudis do want the world to eventually buy all their oil, and thus don't want too rapid a move to alternative fuel sources. Consequently, they sometimes do start to worry if rising oil prices lead to a fall in demand for oil. This time around, though, high oil prices have not triggered much of a reduction in demand. Asian economies (huge oil importers: most Asian economies have higher oil imports as a share of GDP than the US) have generally resisted letting gasoline prices rise in line with rising oil prices. Remember, China is still a communist country. The state oil companies seem to have been told to keep retail prices low. That is one way to contain inflation...

Posted by DeLong at February 28, 2005 11:21 AM