Until a couple of weeks ago, India and the world lived in fear of a new oil shock with crude prices threatening to rise to $100 per barrel by the end of the year
November 18, 2006 (Press Release) --
FEARS OF NEW OIL SHOCK VANISH INTO THIN AIR
LALIT SETHI
Until a couple of weeks ago, India and the world lived in fear of a new oil shock with crude prices threatening to rise to $100 per barrel by the end of the year. All those fears have suddenly vanished into thin air as hotheads among the Organization of Petroleum Exporting Countries or OPEC have brought down the temperature and are displaying cool heads. They are not cutting the production of 27.5 to 28 million barrels a day until the end of the year or December when winter is approaching its mid point of the peak in the Occident. With crude prices down to $65 or 66 a barrel in the second week of September after having touched $77 earlier this year, there is a great sense of relief among leaders of the consumer nations.
There have been fears of a worldwide recession if the oil prices climb to unbearable levels. Those fears have been held in abeyance for some months, if not for a long time. There is a good breather of sorts as the OPEC realizes that a recession could hurt them as much the rest of the world. They are now quite prepared for crude prices to go down further and $60 per barrel is an acceptable price to them. Only if the price goes below that level at the end of the year—and that is unlikely—will they consider production cuts and continue to make good money. But do they really call the shots any more with the world diversifying for supplies? They are well aware of this scenario.
There have been continuous demands and threats of raising petrol and diesel prices in India as the oil companies claim they are incurring heavy losses, especially by subsidizing domestic gas and kerosene supplies to consumers whose pocket cannot be easily picked without political repercussions at a time when five States go to the polls early next year. But the drop in crude prices to $65 per barrel has taken the wind out of their sails and their arguments hold no water any more. Especially it is a relief for the Finance Minister, who has been under pressure to reduce excise duty on domestic petroleum output and Customs duty on imported crude by one rupee per litre. He might be considering ignoring the Petroleum Minister’s demands in view of the drop in world prices. Thus the debate between two key wings of the government should be silent until the next flurry of high cost of energy, especially the imported one.
India is managing its energy security rather well and there is widespread recognition of this fact. It has been revealed that petroleum imports have dropped by 3 per cent, saving billions of dollars. In actual terms the drop is anywhere between 2.5 to3 million tons, considering that India uses about 110 million tons and imports more than 70 million tons of crude every year. How has this happened? There are a number of reasons. One is that bus services in Delhi, Ahmedabad and some other coastal cities are run on compressed natural gas instead of diesel. The second is
LALIT SETHI
Until a couple of weeks ago, India and the world lived in fear of a new oil shock with crude prices threatening to rise to $100 per barrel by the end of the year. All those fears have suddenly vanished into thin air as hotheads among the Organization of Petroleum Exporting Countries or OPEC have brought down the temperature and are displaying cool heads. They are not cutting the production of 27.5 to 28 million barrels a day until the end of the year or December when winter is approaching its mid point of the peak in the Occident. With crude prices down to $65 or 66 a barrel in the second week of September after having touched $77 earlier this year, there is a great sense of relief among leaders of the consumer nations.
There have been fears of a worldwide recession if the oil prices climb to unbearable levels. Those fears have been held in abeyance for some months, if not for a long time. There is a good breather of sorts as the OPEC realizes that a recession could hurt them as much the rest of the world. They are now quite prepared for crude prices to go down further and $60 per barrel is an acceptable price to them. Only if the price goes below that level at the end of the year—and that is unlikely—will they consider production cuts and continue to make good money. But do they really call the shots any more with the world diversifying for supplies? They are well aware of this scenario.
There have been continuous demands and threats of raising petrol and diesel prices in India as the oil companies claim they are incurring heavy losses, especially by subsidizing domestic gas and kerosene supplies to consumers whose pocket cannot be easily picked without political repercussions at a time when five States go to the polls early next year. But the drop in crude prices to $65 per barrel has taken the wind out of their sails and their arguments hold no water any more. Especially it is a relief for the Finance Minister, who has been under pressure to reduce excise duty on domestic petroleum output and Customs duty on imported crude by one rupee per litre. He might be considering ignoring the Petroleum Minister’s demands in view of the drop in world prices. Thus the debate between two key wings of the government should be silent until the next flurry of high cost of energy, especially the imported one.
India is managing its energy security rather well and there is widespread recognition of this fact. It has been revealed that petroleum imports have dropped by 3 per cent, saving billions of dollars. In actual terms the drop is anywhere between 2.5 to3 million tons, considering that India uses about 110 million tons and imports more than 70 million tons of crude every year. How has this happened? There are a number of reasons. One is that bus services in Delhi, Ahmedabad and some other coastal cities are run on compressed natural gas instead of diesel. The second is
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