Crude Realities

Crude oil is the basic need for each country irrespective of whether it is developed economy or under developed economy.

But in developing economies like India and China crude oil demand is expected to grow around 5% in the year 2008. Currently crude oil is trading around at 118$ per barrel in international market and expected to reach at 130$ per barrel very soon, which will push inflation to record high everywhere. Globally, it could be a factor pushing the world economy into a recession. Even though some argue that oil will not swallow a big share of the GDP unless the price reaches $150 a barrel, high prices are here to stay for a fairly long time.

Instead of arguing like this, should not OPEC nation start finding new sources of crude oil. This will be in the interest of everybody. Otherwise developing economy like India and China do not have any other option but to look for the alternatives of crude oil. The government should plan to move towards better energy conservation and develop alternative sources of energy. The main industry that should come forward is the automotive industry. They should start their research and development for the hybrid vehicles.

The other thing that I can think of is that Indian government should start passing the burden of rising crude oil directly to the consumer. Instead of giving the subsidy in petrol, diesel, kerosene & LPG if government decides to pass the burden directly to consumer then only consumers will use these things effectively. When consumers start paying directly, there is every chance that demand will become more realistic. By this demand for crude oil will definitely come down, which can further put a break on the rising prices of crude oil.

Global recession will be in no one’s interest. OPEC should act in its own interest by adding capacities, because if the world turns rapidly to other energy sources, the party may well be over for the oil producers.