Is this report the sign that oil speculators were waiting for to abandon an over-inflated oil market?

Oil prices fell sharply Thursday following media reports that China will increase retail gasoline and diesel prices by 1,000 yuan a ton starting Friday.

How much will demand fall without the Chinese government subsidies? My guess is that it is one of those things that will spook some people out of the market in the short term. People who have bought into the bullish belief that oil prices only go up might take a little more convincing.

It definitely could be big news and I imagine there will be many pixels and much ink spilt in analysis.

It’s definitely good news, though: the Chinese government is moving to remove some of the distortion in the oil market. This, of course, is balanced by the bad news of calls from the US for increased regulation, nationalization of refineries, and other such madness that will distort the market further. When representative Hinchey (the Democrat from New York) is saying things like, “We (the government) should own the refineries. Then we can control how much gets out into the market,” we can almost guaranty high oil and gas prices if the US government gets directly into the oil and gas business. Efficiency and frugality aren’t words often associated with any government agency.