Whats happening with world's crude'

(Sum's perspective on Crude prices and wats the way forward)

In Jan 2007 crude at around USD50 a barrel was a cause of concern although US led by a bouyant world economy was booming at that stage. Exactly a year and a few months later we are witnessing crude at USD 135 levels (a barrel) and it dosent seem to be cooling off any soon. Lets first see whats happening with world crude production levels. Saudis' the homeground of world crude production is more concerned about preserving crude for future generation and is reluctant to increase production beyond particular levels (even if it means saying a no to Bush's requests). Another cruicial reason here is there no spare capacity outside Saudis. Iran is in the midst of sanctions and Iraqi's supplies are now where near their pre invasion era. Though US is trying its best for restoring normalcy to Iraqi wells it still has a long way to go. Some other oil producers like Nigeria is busy with infighting and domestic issues which might affect its supplies. Venezuela nationalization and adamancy does not augur well for world oil production and increased supplies. The largest increase in world's oil production outside OPEC comes from Russia and of late its oil supplies too have been dwindling. US in its homebase of Alaska wants to play the environment card and in light of declaring Polar Bear an endangered species has baanned any chances of oil exploration/ production from the Alaskas. There is a forecast of a hurricane season looming large over Americas and Mexico and it might have a bearing on off shore oil exploration and production.

Add to the dwindled supply story an increased demand of oil from BRIC countires and some other developing nations where the government is subsidizing oil for its masses, youve got a perfect plot for a bleak future. In India the oil subsidy bill is close Rs 200,000 crore a year and the Government (approaching some crucial elections this year) still is hesitating to take a call on increase in prices fearing backlash in elections. This has made an artificial mismatch between demand and supply, as the supply is definitely at the increased levels whereas the demand is buoyant on account of oil subsidy cushion. A majority of India population still manages with less than Rs.50 a day whereas an approx subsidy of Rs.100 a day for a car owner is wasted. Oil Minister wants an increase of Rs.10 per litre of petrol to at least cover up some of the under recoveries of oil companies. In a vast democracy like India elections will come and go , but Governments have to take some tough decisions and move towards a low subsidy route atleast in oil, as the benefit of oil subsidy is enjoyed more by the rich and affluent than by the poor. Consider this the annual oil subsidy bill is Rs 200,000 crorecompared to an annaual outlay of Rs 16000 for rural employment guarantee program.

Better would be to have a long term policy on oil devoid of any political motives. An reduction in oil subsidy will definitely spike up the prices affecting prices of all essential commodities (in lieu of increased transport cost). Government can look to offset this by providing increased support to the weaker section. Strengthening the PDS system and support base of all other essential goods and services for poor section will help. As for middle class and rich there will be an automatic adjustment in demand for oil, there will be increased reliance on public transport and private transport which is now flauted by one and all will be a luxury of sorts. There will be less traffic on roads and some kind of environonment protection too. Government in such a sceneraio has to provide a strong set up of public transport to prevent a system breakdown. The amount saved on account of reduction in oil subsidy can be diverted to strengthening of public transport and infrastructure. This is an enevitable call and government has to act maturely to make oil pricing market and demand driven.

If India is to maintain its core competency in future it has to start thing about sustainable environment planning today. Government must earmark some areas in every city as no private vehicle zone and commuting here must be through public transport only. Public transport and pooling system of commuting should be encouraged. Though India is surplus in food grain production, (assuming all other things constant) it must divert its maximum attention of developing and maximum usage of bio fuels.

The 123 aggreement with US could be a step forward in increasing reliance on renewable sources of energy unless the Left comes out with its own Bio Fuel.....explored, produced and marketed directly from Bengal.

Lets all just make a small contribution by changing our oil usage patterns. We can earmark some days for not using our vehicles (use the public transport or bicycles or put on the walking shoes instead). We can try and go to our workplace with shared means of transport. Its still early to put a break on our globe trottering but companies can try and rely more on video conferencing, just imagine just by one video conference you are reducing usage of oil on car, air plane fuel, hotel resources (water, drainage, enegry etc). Even "staycation" (spending vacations at home) instead of vacation can be buzzword in near future if we dont mend our oil and energy spending habbits 'Today".