Slip­pery slick

The Cen­tre has tied it­self up in knots over its pol­icy on oil pric­ing

The Hindu - - EDITORIAL -

Af­ter a sharp fall at the be­gin­ning of the year, oil prices have risen dra­mat­i­cally in re­cent weeks. The price of Brent crude has risen by around $10 since it touched a short-term low of around $62 in early Fe­bru­ary, hit­ting its high­est mark since late 2014. Ten­sions in West Asia af­ter U.S. Pres­i­dent Don­ald Trump’s de­ci­sion to strike Syria helped push up prices. But it is im­por­tant to sep­a­rate short-term volatil­ity in oil prices ow­ing to geopo­lit­i­cal ten­sions from longer-term trends in the oil mar­ket. In its lat­est mar­ket re­port, the In­ter­na­tional En­ergy As­so­ci­a­tion (IEA) noted that with oil prices rul­ing over $70, the Or­gan­i­sa­tion of the Petroleum Ex­port­ing Coun­tries (OPEC) has “ac­com­plished” its goal of end­ing the glut in global oil sup­ply. No­tably, OPEC cut pro­duc­tion by around 201,000 bar­rels a day in March com­pared to Fe­bru­ary. Yet, to­tal world oil sup­ply ac­tu­ally rose by 180,000 bar­rels a day in March, as out­put from non-OPEC coun­tries, in­clud­ing the U.S., has been in­creas­ing in re­sponse to higher oil prices. IEA ex­ec­u­tive di­rec­tor Fatih Birol said last week that the next wave of shale sup­ply may be in the off­ing as oil prices have re­mained high for some time now. In In­dia, rapidly ris­ing in­ter­na­tional crude oil prices have failed to push lo­cal petrol and diesel prices up­wards in equal mea­sure. The re­tail sell­ing prices of petrol and diesel across ma­jor In­dian cities have in fact risen by less than a ru­pee since the be­gin­ning of April. That is, they are not in sync with the up­ward rise in crude oil prices. Last week, Prime Min­is­ter Naren­dra Modi called for more ‘re­spon­si­ble’ oil prices, which he said have been in “roller coaster” mode for too long. Oil prices, he ar­gued, need to fac­tor in the in­ter­ests of both con­sumer and pro­ducer. This as­ser­tion, along with the talk of al­ly­ing with China and other Asian coun­tries now to buy oil from OPEC mem­bers at lower prices, would have held more weight if the gov­ern­ment’s ac­tions matched the sen­ti­ment. It has im­posed high du­ties on petroleum prod­ucts ever since crude oil prices started mod­er­at­ing in 2014, but has been re­luc­tant to scale down those du­ties in the face of ris­ing prices, lead­ing to record pump level prices. This clearly doesn’t ben­e­fit the con­sumer. Now, with the gen­eral elec­tions about a year away and crit­i­cal Assem­bly polls in Kar­nataka just a month away, the Cen­tre is be­ing cau­tious not to have higher oil im­port costs passed on to con­sumers. This flies in the face of the pric­ing free­dom it had os­ten­si­bly granted to the oil mar­ket­ing com­pa­nies and pack­aged as a ma­jor dereg­u­la­tion re­form. So its stance hasn’t ben­e­fited the pro­duc­ers ei­ther, as is re­flected in their fall­ing stock prices. How the Cen­tre re­sponds to ris­ing in­ter­na­tional crude oil prices was al­ways go­ing to be the lit­mus test of its com­mit­ment to fuel price dereg­u­la­tion. In the cur­rent sit­u­a­tion, it ap­pears that the gov­ern­ment has only tied it­self up in knots over the petroleum pric­ing pol­icy, and with it, its re­formist cre­den­tials.

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