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Rising oil prices

Crude oil prices recently hovered around a record high of US$135 a barrel ( a whopping 65 per cent increase over last year) before falling sharply to US$125 a barrel, the lowest fall since March this year. Experts predict crude oil prices will touch the US$425 mark by 2012.

The repercussions of this global phenomenon are being felt in India as well.

While the Indian Government has resisted the pressure of rising global prices and crude oil is still selling here way below global prices, it may not be able to do so for much longer. Oil companies have reportedly suffered heavy losses. Numerous solutions are being floated to solve the fuel price crisis. Rationing of fuel is already underway and a fuel cess on income tax is another step that the Government is considering.

A combination of duty cuts and a moderate hike in the prices is another possible solution.

So, what’s driving crude oil prices through the roof? An essential global commodity, it behaves much like any other. Some of the contributory factors are a weak dollar, the rapid growth in Asian economies (especially China and India), and their rising petrol consumption.

Local factors such as tax policies, inflation and the prevailing political climate also have an adverse impact on prices.

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