Nation

Soaring Fuel Prices and Crumbling Dreams!

Fuel has become an integral part of people’s lives, at the least since the onset of consumerization of daily life. With a history of only over one and a half century since its industrial and commercial uses were discovered, crude oil and petrol have emerged as the giants that changed the world. Simply put, petrol was to the twentieth century what the internet is to the twenty-first century. Lo and Behold, the evolutionary history of the natural non-renewable oil resources in the world forms the basis for the new-found, less than two centuries old, history of fuel used for commercial purposes. Fuels like petrol and diesel that have thousands of uses today, were not known to man for centuries. But humans have always perceived its presence and have even put it into use for small-scale activities – both industrial and non industrial- until they understood that oil reserve meant extraordinary money!

Rewinding for over 250 – 500 million years, we reach the Paleozoic age from where the history of oil begins. As we know, the remains of the organisms like plants and animals that lived in land and seas during the Paleozoic age settled down in the mud as dust and formed layers of soil over ages, through the process of decomposition and disintegration. These layers when subjected to heat and pressure produced oil and natural gas that were trapped underneath the soil. This thick black liquid, called crude oil today, remained dormant under the soil until its discovery by humans.

Fast forward to four thousand years ago from the present, the presence of oil beneath the soil was first traced by the babylonians. It was in Babylon the first account of discovery of oil near the river Euphrates was recorded. It is said that the Babylonians used the greasy black substance to lubricate their arms and ammunition and as well as to polish jewellery. Steering two thousand years forward from the Babylonian discovery of oil, the next record of presence of crude oil below the soil was made by the Chinese. The system of using pumps made of bamboo, that reached upto eight hundred feet below the soil to suck out the crude oil, was found later in the archeological observations of China. It was found that the Chinese used the crude oil to extract salt by heating it in excessive temperatures. They had also used the crude oil for night lamps.

In the recent history, around the mid-twentieth century, with the advent of kerosene-owing to the invention of methods to extract kerosene from crude oil instead of extraction from coal- the value of crude oil began to rise. And at around the same time, the presence of crude oil in parts of the world was discovered by many countries that bent over backwards to find the oil resources which led to the construction of numerous oil wells . Among the chief competitors for the oil discovery were some islands of the West Indies, Russia and Poland.

Although the age of industrial revolution began before the advent of oil wells and oil extraction industries across the world, the revolution was swiftly propelled only because of the then developing oil industries. Meanwhile, numerous uses for oil were invented-motor run vehicles like cars, for instance. With increasing numbers of motor vehicle production, the demand for oil gradually and consistently increased. But, this increase in demand did not affect the global economy until the 1930s when the middle-eastern countries came into the scene. With the discovery of only a few oil wells in and around Iran and Iraq, the middle-east seemed hopeless in terms of oil extraction until the 1930s. But, the indomitable determination of the region to discover oil bore fruit when Saudi Arabia located a massive oil well in the year 1938. This turned the fate of the arid region with no scope for economic prosperity upside down. Economic prosperity in turn, gave the region an upperhand in the political arena. Today, the middle-eastern countries are among the wealthiest nations of the world.

India too, has its fair share of history of oil. The country’s first oil well was found in Digboi, Assam, during the British rule. Considered the birthplace of Indian oil industry, Digboi has a peculiar origin for its name. It is said that the british officials who supervised the oil search in the region, cheered the labourers and workers by saying “Dig, boy, Dig!” which eventually became the reason behind the name Digboi. Digboi became the first oil purification plant of Asia.

Today, India possesses places like Mumbai High Fields and parts of Gujarat extending from Amreli to Surat in the west in addition to the extraction plants from the east that contribute to over fifty percent of crude oil extraction within the country. Of the crude oil extracted in India, over 55 percent is being extracted from under the sea and over 45 percent is being extracted from the land. It is notable that even though our country participates extensively in oil extraction, over 85 percent of domestic oil needs are catered through imports. India has secured the third place in the list of countries that has the highest rate of import of crude oil.

With the second highest population in the world, the oil needs of India are infinite. Ranging from transportation and electricity to manufacturing of consumer products, oil is used in almost all industries today which has resulted in the skyrocketing demands for oil today. India imports most of its crude oil from Iran and Saudi Arabia, apart from other countries like Russia, Kuwait, Nigeria, Qatar, UAE, Venezuela and USA.

In 1960, the Organisation for Petroleum Exporting Countries (OPEC) was formed to monitor and regulate the stability and prices of the petroleum market. The organisation sets the rate of oil and petrol by taking into account the demand at present and the reservation for future. This leads to constant change in the prices of oil with respect to several factors ranging from excessive or low demand to the political climate of various countries. Thus the resulting difference in fuel prices and the trade embargo or free trade in various regions across the world. The apt example for this would be the infamous oil shock of 1973 in the USA which led to a historic decline in the value of a dollar resulting in massive unemployment that shook the country.

Although the OPEC sets the prices for fuel at the global level, each country adds taxes and extra costs for making available the fuel in their respective countries. Thus, the price of fuel differs from country to country.

Understanding the current ordeal of the ever-increasing fuel prices (especially petrol) in our country is possible with a simple calculation. Original petrol price fixed by the OPEC by taking into account several global factors is the rate that our country pays to import petrol. In addition to the original rate, our government counts in the following expenses that are to be paid by the consumers i.e. the common people: transportational costs of petrol, dealer commission, VAT (which differs for each state) and cess slapped by the central government. Now, suppose the original petrol price is thirty rupees per litre, the additional cost that the consumer has to pay for a litre of petrol is almost fifty rupees. It can be noticed that the price of petrol increases exorbitantly when the additional taxes are counted in.

Reaching the gravamen of this article, this is the reason why the petrol prices are spiking day by day. As the original petrol price increases globally, the domestic rate also increases. But, curiously, in India, the price of petrol per litre does not decrease if there is a decline in the global pricing. This is because of the taxes that are added to the original petrol price. Thus, the price of fuel is always at the crest in our country.

In global charts, India proudly stands first as the nation to impose the highest amount of tax for fuel. Interestingly, the previous government was thrown away from the throne by our pious citizens primarily for its inaction in controlling and dialing down the fuel prices. But, the country is keeping mum about the astronomical increase in the prices at present. One would look askance at what is causing this eerie silence.

In retrospect, it can be discerned that the previous government had the sturdy opposition that yearned to dethrone it. The then ruling party had the constant bickering of the opposition that deliberately highlighted the fuel price situation to the people of India. Moreover, the ruling party was also pilloried by the media for its inert efforts to allay the situation. But at the moment, the ruling party led by Prime Minister Modi is faced with an impuissant and unstable opposition that continuously fails to voice out about the fuel price hike. Besides, the media remains dormant in pointing the problem out. Thus, the question of when the misery of fuel price hike will be solved cannot be answered with certitude until people discern the labyrinth of misinformation and concealed truth in which they glide peacefully by embracing ignorance.

-Subiksha Kumar (Freelancer)

Picture Credits: AFP / thestatesman.com



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