The first step in a new policy package has to be that the oil marketing companies are made free to raise and lower prices, in tune with the market, rues TN Ninan
By the next quarter, the price was down to $98, only for it to climb back up to $115 a year later. Now the price is down to $102.
Anyone who thinks he can predict where oil prices will go next should recall the forecast by The Economist many moons ago that oil was on its way down from about $10 to $5 per barrel.
That was shortly before the price took off for the stratosphere, and the surge did not stop till the price reached $140 in 2008.
A crash followed in the next year, bringing the price down to less than a third of its earlier level.
So all those who think that ‘good days’ have come on account of falling oil prices should keep their fingers crossed.
That, however, is not an adequate policy prescription, which must hold good during times of low as well as high oil prices.
The government should start with two assumptions: first, that oil prices are fundamentally unstable and susceptible to wide fluctuations, and second, that raising the prices of petroleum products is politically difficult.
The logical response to these two realities is to find a way of ironing out sharp price swings, so that retail price changes at all times are moderated and, therefore, politically feasible.
The operating principle has to be the same as that followed in the case of diesel for the last year and more.
Small, repeated price increases (easily absorbed, as experience has shown) have resulted in a virtual elimination of the diesel subsidy.
The first step in a new policy package has to be that the oil marketing companies are made free to raise and lower prices, in tune with the
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