Sunday, May 25, 2008

Tackling the oil crisis

Where is the continuing escalation of oil prices taking us? Are the politicians, government and the people doing enough to tackle the crisis?

Let us take a look at the reality. India imports 70% of its oil requirements. The crude price at $135 per barrel today is more than double what it was a year ago. The prediction is that the prices may further increase to $150-200 during the current year. Last year the combined loss of oil companies because of crude price increase was over Rs.77000 crores. This year the revenue loss may touch a whopping Rs.200000 crores.

Without increasing the price of petroleum products, the oil companies may not be able to survive. At the same time a hike in prices would escalate inflation rate. No doubt that India is caught in a quagmire.

What is to be done?

The first step is to stop politicizing the oil issue. Whenever there is a price increase for petroleum products, whichever party is in the opposition switch to protest mode. But in the states ruled by them, the sales tax is not moderated when the gas bill goes up. This results in a windfall to the states – unbudgeted income! Reportedly, in 2006-07 the combined earnings of the states on petroleum products were Rs.62000 crores. It is necessary to evolve a basis for rationalizing sales tax, excise, and import duties.

Another urgent step the Central and state governments, and the oil companies should undertake is an effective awareness program. Apart from passing protests against price hikes, how many citizens take the oil situation seriously and economize the use of petroleum products?

What are the ways by which we can reduce oil consumption? The oft-repeated suggestions of avoiding unnecessary travel, and organizing car pools are definitely effective. But there is more that can be done:

  1. Stop or reduce the use of air-conditioning on vehicles. The citizens should be willing to forgo some small comforts in the interest of the nation
  2. Improved driving techniques can save fuel. Two simple examples – (a) cold starting a vehicle in reverse consumes more fuel. Park the car front forward at night, and (b) maintaining a steady pace on highways instead of ‘speed and brake’ pattern saves fuel. There is much more.
  3. Traffic jams result in idling waste. Switch off the engine if you have to stop for more than a couple of minutes. Also, the concerned authorities should give more attention to streamlining the traffic.
  4. Good road surface increases fuel efficiency. Single lane roads, unscientific speed breakers and potholes result in vehicles guzzling up gas.
  5. At home, reduce the use of cooking gas. On each cylinder, the oil firms are absorbing Rs.306.
  6. Reduce petroleum based power production.

Can you add some more suggestions?


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Happy Kitten said...

Are the oil companies really in loss? I believe it should be translated as a loss in profit and it is time even this sector practiced austerity along with the consumers during these hard times. Just my thought…..

Nebu said...

It is surprising that such an important subject has elicited only one comment so far. May be nobody has any viable suggestion. I would propose decontrol of import and sale of petroleum products. Let the Govt. get out of this business and from the blame for increasing the prices. Allow the market forces to play.

Abraham Tharakan said...

happykitten, you are right.

Abraham Tharakan said...

Thank you for the comment, nebu.