Daily Archives: June 7, 2008

Blame it on China and India!

There has been a lot of talk recently about how everything from world food prices to world oil prices is caused by increased consumption by China and India. For example, see this article. This is a good example of flawed economic but mass appeal reasoning and the government as well as the media seem to be more than happy to cling to it.

A closer look at the consumption of oil statistics (CIA factbook
), is an eye opener. Oil consumption of US is 26% of the world oil consumption whereas Chinese consumption is 9% and that of India 3%. With such small numbers, oil consumption of India and China will have to grow more than 100% to compete with US consumption and significantly affect world oil prices. This also makes the question of reducing the oil subsidy by these countries a non issue.

Comparison of per capita consumption figures is even more revealing. US consumes 11 liters of oil per capita per day while China and India consume 0.8 and 0.3 per capita per day. Given this, one could easily argue that reduction of US consumption will contribute more to reduced oil prices than that by China and India.

Coauthor: Devayani Tirthali

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