Crude oil prices have collapsed due to a major fundamentals-related announcement out of China. The government of China has announced that they will substantially reduce gasoline subsidies that have artificially inflated use of petroleum in the world's most populace nation. China's petroleum consumption has been artificially propped up by the government's subsidizing of gas prices at the pump. Since China's population wasn't paying a market-based price for gasoline, consumption was higher than would have been expected with crude oil at such elevated levels. If China's drivers must now pay a price for gasoline that is closer to the market price, demand destruction should result, reducing global demand for oil.This has caused the market to react because this will very likely cause rapid demand decay as China's emerging middle class must grapple with much higher gasoline prices. This is an example of the law in futures trading that "anything can happen". We must always be prepared for news that can change the direction of the markets at any time. Phantom refers to these in his book, Phantom's Gift, as shocks to the system. They occur frequently, and we must be ready for them at any time.
