Oil producing nations have hardly done anything so far through OPEC to increase production. Saudi Arabia has claimed that it had increased production and the rise in oil prices is not justified. Many think that oil market speculation has in part been responsible for keeping the prices at a high level.
An ominous warning has come from Alexey Miller, the head of Gazprom, the world's largest gas company, that oil could well be headed for 250 dollars per barrel. He too holds market speculators as being partly responsible for the continuing rise in oil prices. But, then in the same breath, he holds the market situation of supply and demand being responsible for the current crisis and the impending disaster.
The International Energy Agency in its latest monthly report has stated that the huge rise in oil prices is "largely explained by fundamentals". The fundamentals being the mismatch between demand and supply of the oil, the failure of governments to harness other sources of energy such as nuclear energy for the industry is also responsible for this mismatch in energy consumption and supply.
Here in the United Kingdom the demand for petrol by the motorists is said to have fallen by nearly 20 percent as many have taken to public transport. Britain is lucky that it has an excellent public transport system whereas most developing countries including India lack an efficient public transport system for the people to fall back upon.
If the oil prices do touch even 200 dollars per barrel -- and not 250 dollars as warned by Alexey Miller in his prediction -- the world could be headed for a crisis in which the food prices could soar to new heights as the costs of running tractors, tubewells and production of fertilisers are pushed upwards. Civil aviation would be hit hard as would also be tourism and travel industry. Household electricity and cooking gas bills could rise to all time high making them beyond the reach of an average Indian family.
For India the whole crisis could be double whammy. Having failed to deal with the subsidies or think out of the hat in scrapping taxes and other duties on oil, the country could well be headed for an unmanageable rise in inflation. The failure of the government even to come up with figures on how much oil is consumed in running captive generators be it at home, or offices, hotels or industries or on the farms is indicative of its non-serious approach to check the steep rise in prices.
The oil crisis is already causing serious problems in the developed countries. In Europe lorry drivers and transporters are on strike asking the governments to slash the tax on fuel. The rising cost of food is hurting the family budgets. In the United Kingdom nearly half a million children are said to be malnourished as families struggle to control their household budgets within their means.
For India there is no escape but to take energetic and urgent steps to create alternative sources of power generation to ensure that industry, farms and homes are freed from their dependence on oil for energy. Cars perhaps are not the villains of this crisis as the carmakers have continued to produce fuel-efficient vehicles. They are turning now out hybrids that run on electric power as well.
Alexey Miller has been very candid and forthright in his prediction on future of oil prices. Even if the price of oil does not touch 250 dollars per barrel as he predicts, the simple fact is that countries like India cannot manage with the price of oil rising to 200 dollars.
With the kind of intelligent and hard working manpower that India has, she is capable of meeting the challenge of the emerging energy crisis. The big question is will the politicians keep dithering as they have been doing on the issue of nuclear deal. If that happens, a disaster awaits which will negate all the progress that India has made in the last decade and a half.