I came across a surprising article which says that crude oil pricing is significantly determined by speculative forces in international market and not much by supply and demand!
In case if the speculative forces take the price of crude to 200 dollars per barrel, will the government pass on this burden to common man!!
Come on! Welcome to second Zimbabwe! The price of petrol would then reach Rs.100 liter and perhaps the price of cooking gas will touch Rs.600 per cylinder. I know salad meal is good for health! J
Here petrol is fuel not only for an automobile, but also for scaring inflation.
Adding to this, Planning Commission deputy chairman Montek Singh Ahulwalia says that “India should get used to high energy prices”.
Infact we have ways out!!
Why can’t we learn from Vietnam that has barely any refining facilities and is totally dependent on imports which took commendable decisions to shield the people from the burden by “Price Stabilisation Fund”?
There the government had cut the import taxes on petroleum products twice in recent months, lowering the tax on imported petrol from 20 per cent to 6 per cent and the tax on diesel from 15 per cent to 2 per cent. Now it has been made zero.
And here!! Lowering of tax is a joke!! Apart from taxes on petroleum product, last year Government even darted to imposd 5% import duty on crude oil.
Can you see some common sense missing?
At last – “Government needs revenues at the cost of common man’s bread and butter!!”
PS: I suggest reader to go through the sources mentioned below for more insights. In my try to keep the article terse, I have touched many words just superficially.
This post also coincides with the occasion of 1000+ hits for my blog!! Thank you readers :)
Sources:
1) http://indiacurrentaffairs.org/petro-hike-glaring-contrast-between-india-and-vietnam-n-s-arjun/
2) http://www.aip.com.au/pricing/crude.htm
3) http://www.livemint.com/2010/12/16141050/India-should-adjust-to-high-en.html
Rather than decreasing the taxes on petroleum products i think it makes more sense to use these funds in developing sustainable clean energy solutions which would rid us of our addiction to oil and help the environment.
ReplyDeleteHi Manoj,thanks for commenting on the post.
ReplyDeletevery true... green energy is always a better option..that will definitely be the guiding light in next generation. But with the existing infrastructure and need of efficiency there is more say for petroleum products..
As and when more environmental laws come up and more research on sustainable clean energy develops, we should be heading towards sustainable clean energy as u said...
Good work ra. Learned something new today!!
ReplyDeleteGreen energy is a very good solution, but i observe one thing from the word "speculative forces" that aren't our great politicians get brides from oil companies for not opposing hike in international market. And they might even get money for not implementing Green Energy solutions in market because that is a huge lose for oil companies. In India, there will be a change only when people with power and higher authority are feed with money.
ReplyDeleteHave any political party ever protested against government for not promoting Bio-fuel or mix of Ethanol (produced from agricultural waste) in Diesel instead of rise in fuel charges? If Indians authority is interested in learning lessons, Brazil's innovative revolutions is a good lesson.
Nice topic Vamshi...
Hi Savan,
ReplyDeleteThanks for commenting on the post and expect the same encouragement in future...
I absolutely agree with you about the indifference of the politicians about common man's bread.
Coming to speculative forces,they work like this: suppose if I think oil prices are going to increase in 3 months, then I will buy a contract which fixes the price today. So delivery takes place in India on fixed date at the fixed price. Story is fine till here. But what if I cannot spend all the oil I imported on same day? I have to store. To your surprise, we don't have much storage capacity in our country. USA has about 90days storage capacity and china has around 45. So we will buy then and there itself and take the price what ever OPEC quotes.
I am not sure about bribes, but sure about the poor infrastructure of the country hitting in all fronts.... :)
Thank you mahee!!! :)
ReplyDelete