Are you scary of recent increase of petrol price and inflation ? Well .... if yes then be prepared , its just a start. Here is some analysis -
January 2002, the price of crude was averaging less than $19.50, now it is about $132 a increase of about six time. But what about petrol price in India ? In 2002 it was about Rs 30 and now it is about Rs 55 a increase of about two times.
International price are increasing fast and now Goldman Sachs estimated it to touch about $200 . The short-sighted UPA government did not see it. They neither did proper measures to reduce countries oil dependency nor increased oil price because of fear of loosing vote bank.
Fig: Widening gap between domestic & international oil prices (Source: Business World)But if the domestic price is not increasing as fast as international, where is the losses are going?
The PSUs IOC, BPCL etc. are the real looser in this game they are going into big losses . But how long they can sustain these losses ? May be till next general elections :P ... but today or tomorrow the oil price has to be increase and thus inflation .....
2 comments:
Abhishek Kothari : Ashwani, I don't think its wise to fit a directly proportional relation between crude oil prices and refined oil prices. Because oil refining cost was always more than the cost of crude oil itself. I am not considering the cases of new extraction sites in Antartica or anlantic ocean where extraction cost is way too high, So certainly there is a relation but can't be linear.
I completely agree that one of the solutions for this crisis could have been a awareness towards oil usage or some high taxation on high powered low fuel economic sport cars, which now government has imposed it should have been few years earlier. Shame on them, despite having so many high quality economist they couldn't see such a crisis.
Abhishek,
Your comments about oil refining cost is true but refining cost is constant, as its all about technology but crude oil is a commodity which have a direct impact of demand and supply. Fast growing economies like India and China has made demand very high. Their energy requirements totally depends on Oil and coal and they need oil in any case. Oil rich countries are taking advantage of it ... they are increasing price with making supply constant as demand is increasing day-by-day.
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