rising oil price burns - What is government Doing here

[ravikn]

Hi All,

was shocked to see the crude oil prices going up to $124/barrel yesterday. Whats wrong with Central government for not rising the fuel prices? We all know that it is election time this year and government does not want to risk their positions. Currently the loss stands at Rs. 150Cr/day and if this continues, the estimated loss is 1,80,000Cr rupees by the end of this year. We also know that the Oil PSUs have been given with bonds to cover up the loss occurring everyday to them. Do they have any rights to use our money like this

But Looking at the history inflation is at its maximum from last three years in which the current government is not able to do anything in spite of having so called experts in finance ministry and PM himself being an expert in this arena.

BBC NEWS | Business | Oil hits yet another fresh high

Please share your views on how Indians can contribute to cut the inflation rate

Notes:
dear Mods, please put the thread to appropriate section as required.

[Maverick1977]

Dear ravikn, I am quite sure almost none of us are going to be happy to see another increase in the retail prices of Petrol & Diesel. The Govt on one hand levies heavy taxes and duties on these fuels, which incidentally are much higher than the actual cost of the fuels. On the other hand it fools ppl like us by telling them that they are subsidizing the fuels and thus making the oil companies bleed. Thus it giving by one hand but is also using both the hands to take it back. In cities like Mumbai ppl had to shell out Re.1 per ltr of fuel simply because the Govt. built so many flyovers. This is over and above the money that we pay when we enter or exit the city. Now is this fair & just to us especially when the flyovers are in a bad condition in every monsoon? Dont think so. Also what about the hardships that one has to face when these flyovers are coming up at such a slow pace.
The bigger problem is that ppl like us just accept the price hike without questioning the Govt. Not one of us will dare or bother to question the Govt ever for the fear of being put to sleep.
From what I have heard, there's a probability of crude touching highs of 150 per barrel & am sure that the Govt will spare no time in hiking the prices then. However when the prices cool down, they take their own sweet time in reducing the prices. Now is this fair on their part?

[appuchan]

In fact, a recent report by Goldman Sachs has forecast oil prices rising as high as $150 to $200 within two years. This should translate to about Rs 100 per ltr of petrol and 75 for diesel. If the current UPA govt manage to hold on till then, it will be the most painful task for next govt. Cant imagine the associated price rise to follow for everything else. Wish some car maker considered launching a hybrid version below 10 lacs.

[mjothi]

This may sound little wierd and almost impossible but still...

Govt. is providing subsidy for Diesel. Why? It is most essential oil and any rise on that will impact almost all other goods. So, govt uses our Tax money to compensate for the loss. Now, if we people use diesel for passenger vehicles & private vehicles are we not misusing this? Can govt rationalize these? Or collect Diesel Tax per annum .

Simple just make sure that the number of private users are reduced. if done, the tax money can be properly used for developments and in turn we may get taxed less.. Just a thought.

Other way is to increase the alternative fuel vehicles. its a welcome move from govt to relax the tax on electric vehicles. This should show a positive sign in sales of those. but just need to make sure we have sufficient power plants for the same or else, we again start to cry for this in next coming years.

[srishiva]

What would be the total loss to the government if diesel/petrol consumption is greatly reduced ? Will it be not that substantial ?
Then it should gradually increase the petrol prices and at the same time invest heavily in public transport. It should stop private use of diesel vehicles.
This should give a boost to non petroleum based vehicles.

[ravikn]

IMHO, the question was to know why government is just giving away our hard earned money which we spend on fuel everyday instead of investing and accelerating development activities to improve public transport to reduce the burden on common man. I'm novice in this field so would like to understand.

As rightly pointed by appuchan, if corrective and preventive actions are not taken immediately by forecasting what will happen by this year end, this government will put the common man into serious trouble by making everyone to pay for it.

My thinking:
1. It is also possible if they can create awareness of how important to save every drop of fuel everyday and could think of issuing fuel cards(this may sound weird to everyone) to all using which up to "n" liters of fuel is provided at the subsidized rate and above that are charged as per the cost

2. Increasing number of trains and routes and providing more facilities with easy reservations in them will attract more people and save lot of fuel and help the nation grow.

3. Increasing number of goods train which is actually maximum contributor to fuel savings. Improve railway facilities in order improve the turnaround time can do wonders

[phamilyman]

How we can contribute?

Drive our cars lesser, cycle more (like the dutch). Encourage others to do it.

And the most effective: Pray to god

PS: Subsidized fuel? Pray why? Mobility is not a fundamental right in my book, when nearly 25% of Indians barely manage a square meal.
PPS: BRT is also another method. Runs into hiding from Gangsta

[vasudeva]

Originally Posted by Maverick1977

The Govt on one hand levies heavy taxes and duties on these fuels, which incidentally are much higher than the actual cost of the fuels.

FYI, excise and other duties on transport fuels is there in almost all countries (incl. the US) although the degree varies (FYI: diesel is priced higher than petrol in US). Excise has always been used as (a) means to discourage consumption (b) a reliable source of government income because of the relatively low price elasticities of demand. Also you should know, that not only in India, but a number of governments worldwide have responded to oil price increases with small cuts in fuel excise tax. However, the potential to shield users in this way is limited by the adverse effect on government finances. It is also not very prudent as it reduces incentives for fuel conservation and reduces consumer response to oil price increases. Most importantly, by not increasing prices in the same proportion as costs, it reduces the price elasticity operating on the oil exporting countries and thus increases their market power.

[ramie2400]

Hmm seems the time has come for me to choose a good By-cycle with all the feature..Battery Motorized/Manual pedals,disc brakes for front+rear tyre,good fat tubeless tyres and a good Bell "tring-tring"...

Ramie

[ECM]

Don't think much,Crude will slowly come down after August and will go vertically down after sep-oct,reason election time in USA,don't surprise if you see crude trading at 80+ zone in December-08.Crude has direct link with $ and $ is now gaining the ground,Bush will do his best to take $ up near election time and process has just begun,It is hard to summarised this in one small para but after hurricane season ends in USA,short crude oil and see 80 in it,wanna bet?

[shajufx]

As far as international oil scenario is concerned, indians are always paying higher prices for cummodities more than anyone else. Imported car/product prices are the best examples for this. Indian governments have always promptly raised the prices when the international oil spot rises ! But seldom lowered the selling price when international oil spot dropped ! Thats a huge figure when we calculate the difference of what the government has paid and for what price it was sold to the public. Just few charts and analysis for people who are interested in knowing more about the scenario !

Crude has direct link with $ and $ is now gaining the ground,Bush will do his best to take $ up near election time and process has just begun

Dont be surprised about the nasty fall of the US$ in the near future. Euro is going to replace everything in the international levels. US economy is going through deep troubles, not anyone in the US (not even the Fed Reserve) is capable of doing anything to improve situations as of now. Anyone who are employed with US brands will feel more heat of the situation. People who are in the HR line will know, majority of the US companies are not recruiting, many of them are on the 'lay off' mode. Buying power of the US$ is taken for a toss. There is more to the story, but that is a huge topic to discuss in an 'oil' thread. I trade Euro/Usd right from the time it was just 0.8500 levels, seen 1.6020 last month (22nd April 2008) and its a huge move over 7 years. Thats close to 7520 units without much retracements. Thats a return of US$75000 for an investment of US$1000 done 7 years back to make it sound simple.

[phamilyman]

Shaju,

The picture you paint above while worrisome is incomplete. Comparing with imported cars/bikes is patently irrelevant and wrong. Commodities like mobile phones are pretty cheap in india FWIW.

Then again, maybe you neglect to mention that eurozone economies are having massive blues - be it france/germany growing slower, or italy/spain considering falling out of EU zone in order to devalue their currencies/play with interest rates to give a fillip of demand. I have traded EU/USD at the time in 2005 when it struggled around 1.2-1.3 range as well. So not too black/white as you make it out as well.

the charts are just a whole bunch of FUD. We all know oil is running out, that there is volatility/speculators in the market who use even news of falling inventories (not of genuine supply demand mismatches) to hike prices. That is how the world is.

else please supply some fancy charts about how global rice prices have doubled tihs year - even without wars or the US credit bubble breaking up.

And it all goes OT. Interesting stuff there but does not tell a tight clear story. not for me. But yes, what your long post says can be summarised thus:
Any product with strongly inelastic demand and STRONG speculators will lead to rent extraction and spikes. So, what's new?

[ECM]

Shaju,dont forget US is still a super power and when THEY want Oil at THEIR price,they get it...last example is war in Afghanistan,Oil started going up and on the day US bombed Afgh.Oil made its year high,nice details you have shown,I request you to check US$ Index and Elliot wave of oil and $ and Euro,you will realise what is stored for H2 for all of them in 2008.

[shajufx]

Chart and Figures what I have given above are related to the thread on 'rising oil prices'. Summary of the post is not about speculation and spikes, sorry if you have misunderstood the message. I just meant to say Indian government do not do anything realistic to help anyone here, in line with the international oil price ups and downs. Government knows only to raise the prices, not to cut them down when required. US$ Vs Euro could be out of topic, although it was just a response to the post above that. I did not compare imported car prices with the oil. No way. It was quoted as an example of what indians end up paying double for everything coming to the country, with a huge exception of all the cheap stuff coming from China and similar places. Yes you are right, even Nokia and many other european branded mobiles sold here are 'Made in China' if you ever checked the details. Sadly Porsche, Ferrari, Lambourgini, Aston Martin and many others do not come to India from China, so we end up paying 3 times of the actual cost.

[theMAG]

That the government HAS to cut duties/levies on petrol is no longer a wish - its a dire necessity.