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Bom Project: Oil Price Decontrol in
Bom Project: Oil Price Decontrol in
Bom Project: Oil Price Decontrol in
OIL PRICE
DECONTROL IN INDIA
Reasons for Oil Price
DECONTEROL
Supply and demand forces
Market Speculation
Expense of refining crude oil into
gasoline
Cost of distribution among the
consumers
Exponential trend and 95% confidence interval. The red points are the recent drop
from Aug 1 to Sept 19.
The above two graphs show us the variation of oil prices over the past several
years. The graphs also indicate pattern on how much sensitive oil prices have
become to small changes around the world
Lets go ahead and try to make a list of major factors
that determine these prices:
► US crude oil inventory levels: We all know that most of the crude oil
that US uses gets imported from other countries which are rich in oil. To
prevent the nation from going without oil, the governments has invested
in building and maintaining about three months worth of reserve
capacity of oil. That means if these OPEC countries decide to not export
oil to US for whatever reason for a short period of time, the country can
survive on just the reserves for three months! Also US is the largest
consumer of oil in the entire world. Whenever the reserve capacity falls
down in US for any reason (such as cold winter or heavy travel), the
demand for oil goes up and that pushes the oil prices to end up higher.
New Delhi, Jan 4 (ANI): Oil prices hit the once-unthinkable $100-a-barrel mark on
2nd January. Responding to the first time ever triple-digit price for crude oil, India’s oil
Minister Murli Deora indicated that that the government could raise domestic fuel rates
or cut duties to ease losses at state-run oil retailers. Deora said there could be a duty
cut as suggested by the left parties.
Oil Price Decontrol: A Bold and
Strategic Move
So, even though inflation (especially of food prices) is still
high, the government is pushing forward with decontrol.
Kerosene will likely remain subsidized and accessible to
the poor through the Public Distribution System. Rural
Employment Guarantee and other mega-pro-poor
initiatives may have convinced the poor that the
government’s heart beats firmly for them. Prime Minister
Manmohan Singh has the upper and middle classes firmly
on his side, given his track record of liberalization and
economic growth. If ever oil prices skyrocket, the
government can always intervene again, and possibly
gain political payoffs in the process. All these factors
explain the boldness and timing of oil price decontrol.
Strategically, higher oil prices will make other sources
of energy more attractive. As we focus on a fossil fuel
free future, research and development will inevitably
make renewables, fuel cells, etc., more competitive.
Cleaner, greener fuels will become viable. India’s
abundant sunlight, wind and fuel crop capacity will lead
to energy independence.
THANK YOU
RUPALI ROY
ROLL NO – 516
TUTE GROUP- I-54