U.S. Energy Policy Could Be Worse (No, Really!)

by Tom Bozzo

It could be China’s, for one. The FT reminds us that there are income and substitution effects:

Even though GM does not officially sell Hummers in China, a booming grey market has developed. In Beijing alone, more than 15 car dealers are selling the tank-like vehicles to China’s army of new car-buyers.

Hummers have become particularly popular among the wealthy urbanites who like to spend their holidays on long driving treks across the country.

The trend is abetted by the government, since like a moderately terrifying portion of the developing world, China subsidizes motor fuel at retail:

With demand for oil growing at 8 per cent a year, mostly met by imports, the country is the biggest contributor to the annual increase in oil consumption. Yet its petrol and diesel prices are as much as 40 per cent below US levels – themselves low by European standards.

Since China still has legions of the dirt-poor, and only the relatively well-to-do can afford cars (even if many of the new auto market participants aren’t rich by Western standards), this is a major case of upward redistribution.

Meanwhile, for a cross-cultural brand presence (or is that penetration?) laugh:

Beijing Auto has a military-style SUV called the Trojan.