Oil Prices And Vicious Cycle



WHENEVER fuel prices are hiked there are protests by people and the Opposition for a few days, before everybody goes back to normal. At present many nations are facing high inflation due to the rising oil prices in the world, which has severely impacted production and consumption. High inflation and skyrocketing food prices have affected the common man more than anybody else in the country, which is at the receiving end of the rising oil prices. The oil price rise results in transfer of income from oil importing to oil exporting countries. The increase in the oil price has pushed up the cost of fertiliser whose manufacture necessitates petroleum or natural gas. Natural gas has its own supply issues as oil. The rise in petrol and diesel prices in turn has a rippling effect. As all the commodities are transported across India on vehicles that run on petrol or diesel, so the increase in fuel prices results in price rise of these commodities as well. The inability of the central government to rein in fuel prices will disaffect the people, whose anger will be exploited by the Opposition.  Hence the Centre should come out with some ameliorative steps to douse the fury. Fuel prices should be rationalised. It is pertinent to note here that most of the revenue earned through taxes from petro products are channelised for development. The government should rethink on this mechanism. As we are fully dependent on the international market for fuel, we need to reduce our dependence on it. What we need is development of bio-diesel; the government should allocate more funds for developing alternate sources of energy, high capacity goods and alternate public transport system. The government should advise states to cut ad valorem duty on petrol and diesel. It should cut its own excise duties on petroleum products.  The government needs to rethink on deregulation of petrol prices.