ByÂ Shweta Dandekar:
Every time you take your car or motorbike to the petrol station, the price of oil rises. And it seems to us that it will never stop rising. Newspapers are splashed with stories of the price of luxury being exactly equal to the price of basic commodities today. Who would have thought that onions (a basic necessity for all) would cost as much asÂ petrol (a luxury meant for the ‘well-to-do’ class)? From $70 a barrel to the recent $120 per barrel, the rise has been a phenomenon in the world market. But what is causing this continuous series of hike in oil prices? Is this hike a recent phenomenon?
There are several factors that affect the oil prices in the world market today. Oil is an important commodity that every country, especially a developing nation, requires. Developing nations like China and India have high demands for oil which is important for growth in every sector. However, this is not the cause for the sudden increase in the price of this basic commodity. Oil prices, like everything else, have been rising steadily since trading started. So what has been the turning point in the past few months?
A severe winter in Europe recently was a major cause for the high demand of oil from the Middle East. In pursuit of keeping citizens of their countries warm, the demand levels rose, and in turn the price of oil increased all over the continent. This reflected in the world market, and almost instantly, price of oil rose all over the world. As January came to an end and the winter passed, a new “threat” began to take shape.
Tunisia’s unrest which ultimately led to their freedom reflected in other Middle Eastern countries as well. Egypt, Libya and Bahrain followed suit soon after. For countries not directly related to the Middle East strife, these months are crucial. Due to the uncertainty that lies because of the agitations in the oil countries, there are high chances of price of crude oil rising. Trade could come to a complete stop because of their domestic problems. Speculations are in nations watching the show, and it is their speculation that is the direct cause of increase in oil prices. As it is quite possible that our only source of oil supply is cut, the prices are being increased. The oil market is dominated by commodity traders who decide the rate at which petrol will be sold.
The impact of this hike is nearly devastating to all other industries. Transportation has taken a big blow as it cannot survive without oil. Airfare, local transportation and personal transportation are no more assets to an individual. Perhaps, the cutting down of duty taxes would decrease the prices, but the latest Budget session does not look inclined towards it. For now, it looks like oil prices will continue to increase, causing inflation in parallel industries.