Rude ‘Crude’

Bang! You must be burning with no visible flames because of the recent fuel price hike. Worse, if your ‘Roti’ is cooked on LPG gas stoves, then each one of them is becoming more expensive. Yes, we do have many reasons to criticize the outrageous price hike which has fumed the country all over. But we could also try at least to consider a few reasons for this move from the Government. I strongly recommend reading ‘Government’ as ‘The Government of India – Our Country’ not as the UPA or Congress government. Should we know the whole perception about this dark market of fuel and gases before we really conclude anything? How much is the Government is blamable for the price hike? Think, think and think.

Crude oil is the most ‘wanted’ commodity in the world today. Everyday 7.6 Crore barrel (approx 1200 crore litres) of oil is consumed by the whole world. Let’s see, who the top consumers are!

Country	Oil Consumption
United States of America	200 lacs barrels per day (not surprised at all!)
China	56 lacs barrels per day
Japan	54 lacs barrel per day
India	22 lacs barrel per day

 

India consumes a fair amount of oil everyday and ranks among top 10 largest consumers of oil in the world. India does not have enough oil produced from within the country itself and hence we import 70% of our consumption. Although, country’s capacity to refine the necessary oil stock is quite adequate.

 

 

 

India has to largely rely on the imports for oil sources as the consumption (approx 35 crore litres per day) is significantly greater than the ability of production (approx 12.7 crore litres).

 

 

Indian government officially dismantled the Administered Pricing Mechanism (APM) in 2002. APM used to regulate the flow and the prices of oil. Oil companies were told how much to sell and at what price. It means there was a less influence of international market on the fuel prices in India. But an insistence for free market pricing and foreign competition made the government to loose APM completely. But they kept an indirect eye on some key fuels to keep regulating their prices. As a result since last few years, crude price is having high correlation with the international market price. 

 

 

India’s price regulation mechanism for crude oil came to an end and it is to encourage the foreign participation in oil exploration. Now the prices are highly correlated with the international market price.

 

 

 

 Let us see the domestic price graph of petrol, diesel and international price of crude oil between the years 2003 and 2008.

 

The graph clearly represents the gradual increase in prices of petrol and diesel since 2003. Of course, it shows the prices getting increased on regular basis since 2003 and that is natural. The most interesting part resides between starting 2007 and mid 2008 (now). In this one and half year crude oil prices have risen from $55.80 per barrel to $138.14 per barrel (as on 7 June 2008). It comes to 150% of hike within just 18 months. As a fact, India is least capable to anything about these prices and hence we have to absorb this increase in price somehow.

 

Let us compare the petrol and diesel prices during these 18 months of time. Petrol has gone up from Rs. 42.85 (Jan 2007) to Rs. 56.52 (June 2008) and Diesel has crossed Rs. 38 (June 2008) mark in compare to Rs. 30.25 (Jan 2007). There is a 33% and 26% of rise in petrol and diesel respectively. Doesn’t it seem that we have reasonably regulated fuel prices despite of the madness running over crude oil price?

 

 

 

The government is bearing a huge financial burden to provide uninterrupted supply of petrol, diesel and LPG to common men. Looking at the unprecedented price hike in international crude oil prices, we have got to bear a fraction of it for our own oil companies and hence for our country.

 

Ministry of Petroleum and Natural Gas has released the figures and they suggest that the government and oil PSUs have been trying to moderate the impact on the common man. At current prices government will bear a financial burden of Rs. 245,000 crore in 2008-09. It would be out of scope to understand crude oil international price market at the moment. We need to be concerned with the solutions we can derive by our own efforts to deal with the increasing prices of fuels. There is not doubt that the increase of Rs. 5 per litre in petrol price is significant for a common man but for now considering this difficult situation and to act accordingly is the only choice left. It could have been worse if we look at the over all growth in crude prices internationally.

 

 

As one of the main reasons is that we have a greater reliance on imports for the oil and that is because we consume more. How can we contribute our bit? It is by trying to optimize our consumption of fuels, whether it’s petrol, diesel or natural gases. Broadly, any kind of energy should be saved to minimize unexpected consequences. And at last, Indian government has put some suggestions in a public advertisement, which may help us controlling our own consumptions and hence the oil situations and prices in future.

 

 

 

Conserver Energy for Brighter Future

 

• Drive at optimum speed of 45-55 kms/hr
• Maintain correct tyre pressure
• Switch off engines at traffic signals
• While driving do not drive the clutch
• Keep your vehicle engine tuned
• Light your stove only after you have all ingredients within your reach
• Pressure cooking saves fuel and time
• Use optimum quantity of water while cooking
• Use higher efficiency ‘ISI’ marked LPG stove

 

    

Sneh Bhavsar

Ahmedabad | 9 June 2008