Lynne Kiesling
James Hamilton’s recent discussion of Chinese oil demand mentions the government actions to subsidize oil consumption to fuel economic growth (yikes, what a far-flung distortion!). A WSJ article (subscription required) from Wednesday describes the consequences of China’s refined fuel subsidies: shortages and queues.
Drivers in southern China have been queuing for as long as three hours for a tank of gasoline this week, only to face limits on spending and prohibitions against filling spare containers. In Guangzhou city, protests erupted briefly at the Luoxi Gas Station yesterday after attendants provided dwindling supplies to police who jumped to the front of the queue. After a busy morning, Luoxi tapped out. …
… Beijing has kept a tight grip on fuel prices, because they are central to the cost of transportation, utilities and industrial production. Government officials fear that any sharp spike in fuel costs would spur inflation and, possibly, social unrest.
Sounds to me from this article like they are getting social unrest because of the shortages and queues, a consequence of failing to allow real markets to adapt to changes in real conditions.