Crude Oil

Six months ago the government made a decision to cut fuel prices. A litre of petrol was cheaper by five rupees. Around this time I overheard a conversation, one man was saying this to another in his local vernacular “Whenever they (the government) want they raise fuel prices, whenever they want they lower it. Once the election is over they’ll not hesitate to hike the cost again...”

That man sure got it right, Murli Deora has not hesitated to hike the price of fuel. A cross the board hike of petrol by Four rupees a litre and diesel by Two rupees.

After a 14 week winning streak the Sensex has broken the momentum by showing an inter week fall. It’s been a period which has been very successful for the bulls. They’ve been on the march for the past one hundred days .Market watchers have been skeptical though, saying that the period is not yet ripe for the birth of a new bull market. This could have been a ‘fake rally’ with investors sizing up their positions. Nonetheless even though the market has broken the winning streak it is still a good thing because the Sensex is now at a position where it can consolidate.

The airline companies simply can’t seem to catch a break and unfortunately neither can airline passengers. Once again the airline sector is all set to hike air fares across domestic routes on all flights. The country’s two biggest airliners, Kingfisher and Jet Airways have already announced that they will indeed be raising prices by as much as Four Hundred rupees a ticket. This time the excuse for the price hike being given is the all too often heard ‘fuel surcharge’.

For the past one year airline passengers have been subject to  one agony after another ,all of which have been ways of raising money for the airline companies either in the name of ‘maintenance fees’, ’infrastructure fee’, ’user development fee’ or simply the fuel surcharge.

The battle between the OPEC oil producing nations and the rest of the world is an ongoing one. The powerful Middle Eastern oil rich countries supply nearly half of the world’s crude oil requirements. For a country like India which imports most of its oil to fuel the needs of its ever growing population, every move made by the OPEC is watched keenly. OPEC does not directly control the price of oil but it controls the amount of oil supplied to the world. Thus by simply balancing the classic demand-supply equation, OPEC is in a pretty good position.

It’s been a long time coming and it’s finally happened. The Indian Government has decided to cut fuel prices . Effective from December Sixth a litre of Petrol will cost five rupees lesser than before while Diesel will be two rupees cheaper. As the price of crude oil worldwide takes a tumble and puts the world’s leading oil producers in the form of the OPEC countries in a tizzy, the rest of the world can take it easy for the short term. In India the decision to cut fuel prices is just as much a political decision as an economic one.

It’s a case of economic policy ruling over political sops. The Prime Minister has stated that petrol, diesel and other fuel prices will not be reduced despite the fall in global crude prices. This bit of news has been made much against the wishes of the Oil Ministry which had recommended a cut in petrol prices. The ministry was sure that a fuel price cut would be enforced till someone else changed that decision which has led the PM to say what he has said.

The only piece of good news that has been coming in amongst the financial chaos in India and the world for the past few weeks has been the decline of inflation and today continued that sentiment to some extent. Inflation has now fallen below 11% and the figures released today indicate the present number at 10.68%.The figure itself is not something to cheer about. A 10% inflation is still high but the declining rate of inflation from a high this year of Thirteen Percent  to what could in a month’s time be a single digit number has been encouraging.

On a lazy Sunday afternoon while every other person was resting or taking an afternoon nap, most of India’s business community had its eyes set on Reliance Industries’ Corporate Park in Mumbai. As the chairman Mukesh Ambani held up a bottle of something dirty, sludgy and green, a reassuring calm spread across the room. No outsider could ever comprehend the wonderment at this strange colored liquid but those who knew what it was were fully smiling from ear to ear.

This was the liquid that Reliance had been searching for from the past six years. Deep in The Bay Of Bengal a team of scientists, engineers and servicemen had toiled away braving everything from the uncertain weather to the prospect of not finding anything. So when Mukesh Ambani formally announced that his company had struck crude oil 8000 feet under the sea, India’s business community rejoiced and so did the people.

The movement of oil prices in the world markets has brought about the setting in of some important changes. Free markets like the United States or the Socialist ones like India have had to accept the fact that the very structure of the world economy is changing. We once viewed the 100 dollars per barrel of oil as an indication to push the panic button but after everything that has happened in the past one year there is an inclination to believe that this figure despite being regarded as ‘high’ is still a ‘realistic’ expression of the oil scenario.