A look at Petrol Dependent Economy and consequences and Way out
In the last 25 years, petrol and diesel prices have jumped by 250%. This translates to an annual growth of 16% every year. The inflation for this period is less than 6%. Every time the prices rise, some strikes are done, memorandums are submitted, and all forget everything until the subsequent price rises. The common man loses money. Petrol companies are saying they cannot make money and are incurring losses. The government says that petrol companies need to be privatized because of the loss. Private companies say that they must increase prices because international prices are rising due to the Iran war. Previously, it was the Iraq war. What is the root cause of this problem? Who fixes the prices? What alternate avenues exist for us if we cannot stop the price rise? India produces more than 10 lakh engineers in various disciplines. Cannot we do something?
For thousands of years, all energy needs have been met only by coal, wood, dried cow dung, etc., and other natural processes. Night lamps used to use castor oil. The entire economies of at least India and other Oriental countries depend on agricultural products. Farming is done by bullocks. Transportation of goods is done in canals or horse-drawn carts. The average speed of such transportation is around 25-35 kilometers. Even thousands of miles of sea travel were made using coal or oil created by compressing coal. Economies are coal-based economies. India was a net exporter, and its energy was sufficient.
With the discovery of oil, which British and US petroleum companies controlled, the third world was forced to shift to oil-based economies from coal-based economies. This is the only way the amount spent on energy, transport, lighting, and industry can be moved to the West from all other countries. For this, it was stated that burning coal and wood pollutes the atmosphere. What is not said is that coal burning has been occurring for thousands of years with no documented health effects. Oil was sold as pure clean energy. Once countries started using oil, the pollution went through the roof, and many lung and heart diseases started coming. This only helped medical companies to sell more medicines. Agricultural energy was replaced with hydroelectrical energy. Huge dams, etc, made terrific money for contractors.
First, how is the price of oil supposed to be fixed? Except the bore well costs nothing, and oil costs nothing. It is a free national resource. It is extracted and distributed. Until 1973, the cost of oil was a barrel $ 13- $20. In those days, oil extraction distribution and wholesale were done by single companies. There was a catch. Any payment for oil has to be done in US dollars only—this way, every country that wanted oil wanted dollars. The US is the only country that produces dollars. More dollars are demanded to be more suitable for the American economy.
Since 1971, MNC oil companies have divided the oil business into extraction, transportation, and distribution. Each separate entity added its profit. This made oil prices jacked up by a 3 300% rise in oil prices. 300% rise in the dollar demand. Whoever opposed this was treated as a terrorist nation, and the world plunged in to end fewer wars. Iraq demanded money for oil in Euros, and it was attacked. Iran created barter or gold-based oil bourse and was about to be attacked. This extra profit is not part of the oil cost. But it is to make more money by same companies by dividing their operations.
Then, speculation entered the oil trade, and from when the oil tanker leaves Middle Eastern ports until it reaches New York or Houston in the USA, traders will take options on the tankers. This is like cricket betting or political betting. This jacks up oil prices by another $20 to $30 per barrel. At this price, oil is offered to all third-world countries. This speculation is the cause of the rise of oil prices internationally.
Crude Oil Quality
Oil from which Petrol or diesel is derived is not a homogeneous product, and its quality differs from country to country. We mostly get Iran oil, purified to make petrol or diesel.
Indian Scenario
During the 1971 war, only a private oil business existed in India. During the war, private oil companies refused to supply oil to the Indian army, stating that there should be no war as war is terrible for business. During that time, oil companies were nationalized in India. India made great leaps in developing oil refineries for Indian purposes. Indians specialize in oil refining, which is suitable for Iranian crude oil. If pressure is kept on India to import Saudi oil, we must invest billions of dollars in modifying refineries, which will take the petrol prices close to Rs 150 per liter.
Since 2000, India has been privatizing the oil industry. Though it appears local Indian private business people are setting up businesses now, foreign MNCs have paid Indian companies to corner the oil blocks for exploitation, making money by selling Indian oil to Indians at international speculative prices.
Mangala Oil field in Rajasthan has more oil than Saudi Oil fields. But it was taken over by British Petroleum, using Vedanta as a front company. All KG basin gas production is taken over by British Petroleum, using Reliance as the front company. Though the transport costs within India are significantly lower, these companies refused to sell at a reduced cost to Indians, insisting Indians have to pay at international prices as fixed in New York or London. Though it costs only $ 1.35 per BTU to supply natural gas from the KG basin, Reliance insists on paying $ 4.13 per BTU, citing international pricing. The exact process is used for oil shipped from Rajasthan to Indians. This is nothing but international robbery. Reliance is reducing Gas output from the KG basin to raise the prices. During the 1971 war, it was BP that refused to supply oil to the Indian Army, and that is why we nationalized the oil industry in India. But after 30 years, BP was able to get hold of Indian natural resources, both gas and oil, and wanted to sell at excess costs so that they could make good on lost profits of the past 30 years.
With so much dependence on oil, the average speed we achieve in the transportation sector is only 35-45 kilometers per hour. Not a significant improvement. However, the massive rise in oil costs increased food prices, equipment prices, subsidies for the domestic oil industry, and agricultural input costs. It made the common man’s life miserable, taking everything they made into the pockets of oil companies. Reliance owners can build a house at Rs 4000 crores, while many farmers are killing themselves as they cannot pay input costs for their agriculture, like electricity or oil.
The greed of these international private companies is the root cause of the rise in oil and natural gas prices. The same companies killed every alternate energy production like Solar, Energy from municipal waste, and agricultural waste. India produces close to 1000000 engineers in various fields. It can produce enough alternate energy sources that cost less than petrol or diesel but are still environmentally and ecologically friendly. We are the first country to create unlimited energy extraction from thorium, a safe, cheap, free energy source from the sands of Indian coastal areas and a good substitute for nuclear energy. But that research is being killed for expensive and dangerous nuclear energy as all the technology was to be imported by the West.
