In China, OPEC's nightmare comes true

[Doctor Cynic]

http://www.reuters.com/article/vcCandidateFeed2/idUSTRE4B44L720081205

We'll see how this industrializing state will handle the prickly subject of energy.

LONDON (Reuters) - China's decision to link domestic fuel prices indirectly to the international crude oil market, subject to a price cap, while hiking the consumption tax on gasoline and diesel and phasing out a variety of road tolls and other fees shows Saudi Arabia's worst fears about high prices are demand destruction are starting to come true.

It seems likely to confirm the kingdom's determination to see prices stabilize around $75 per barrel, well below recent price peaks, and far below the level sought by some other OPEC members, as well as international oil companies and advocates of alternative energy.

China is among the world's most inefficient users of energy, measured in terms of BTUs consumed per dollar of GDP produced.

Since China's economy is one of the largest and fastest growing, and heavily reliant on imported crude oil, China has been hit harder than any other country by the recent surge in oil and energy prices.

Rising energy prices have worsened the country's terms of trade, and threaten the viability of much of the industrial base (including the power-intensive steel and aluminum industries).

[FarCenter]

1. Its odd that major countries like China and Japan don't do long term contracts

with the OPEC member countries, rather than let their costs be driven up and down by the speculators in London and New York?

[ThatOne213]

2. Oil at $40 - go back up to $150+

With oil at $40 per barrel there is no better time to be searching for alternative fuels (before it goes up to $150/ barrel again).