Oil price hike: need for long-term energy strategy

For the fourth time since the early 1970s, oil prices have shot up and touched a level of 37 dollars a barrel. On this occasion, however, the increase has not been brought about by any specific political upheaval, such as the Arab?Israel War in 1973, the Iranian Revolution in early 1979, and the Gulf War in 1990. In fact, there have been signs of an impending hike in oil prices for at least the past 18 months, and an increase to levels above 30 dollars a barrel seemed likely. However, even the Organization of Petroleum Exporting Countries has been taken by surprise by the magnitude and dimensions of the increase. The main factor behind the current hike is the surge in demand that has taken place during this summer. Refineries, particularly those in North America, have been working at full capacity to satisfy the increasing demand. But they neglected production of heating oil and concentrated on producing gasoline and diesel oil, leading to very low stocks of heating oil. The impact on developing countries, like India, of this sudden increase is likely to be burdensome. Even though the government has not passed on the full impact of the price increases to the consumer, the various macro-economic outcomes are likely to lead to an inflation of around three per cent over and above the existing level. This would create hardship and some degree of protest, which has obvious political implications. There is little that can be done in the short run, but there are clear options that we must understand and accept in the long term. These unfortunately are not receiving the attention they deserve, and in fact do not even get discussed and debated in a manner that would lead to actions for safeguarding the country?s interest in the future. There is need for a clear long-term energy strategy for several societies in the world, and no country needs a serious effort in this direction more than India does. One hopes that at least with the current crisis, the government and Indian society will take the initiative to develop an appropriate long-term energy strategy for the country.