Supply/Demand Imbalance

“Fuel Subsidies Overseas Take a Toll on U.S.” in today’s NY Times underscores the complex relationship between global fuel prices, economic activity, and government fuel subsidies in developing nations.  If China, Indonesia, and India stopped subsidizing the cost of diesel fuel, gasoline, and kerosene their prices would drop, as would economic activity that provides markets for U.S. goods and services.  Eliminating or materially reducing fuel subsidies would wreak political havoc in those countries but is necessary to balance supply and demand.  No easy fix here.