Many developing and third-world countries have strong subsidies on gasoline and other crude-derived fuels and they simply cannot maintain those subsidies. The recent shortages, riots and strikes in Nepal are a direct consequence of rising crude oil prices and a broke national fuel distributor.
I've wondered for a little while what was the effect of those subsidized sales on crude oil demand and prices. For major consumers like US or Europe, no (realistic) price is too high to strongly impact demand but in low income countries, energy costs are a much bigger share of the economy. Nepal is certainly not a factor on world demand but if China has to let go, we may start to see some significant demand destruction in oil markets and declining prices.
Commenting by HaloScan
