Friday, May 02, 2008

The unreal world economy

Oil is at $110 a barrel, yet the price of petrol and diesel hasn't gone up in India the last 3 years. Since a year back, oil has doubled from around $60 to approximately $110 today. Yet, I am paying the same in Rupees for my petrol as I was last year.

How is this possible ?

The price of petrol is being artificially maintained. India's 3 large petrol and diesel retailing companies, all state owned, are deep in the red, their combined debt has mounted to over $2000 Billion !

This is being done to keep people happy, to keep prices from going crazy. To ensure that people can go on living and there are no major disturbances in towns & cities.

But this is not sustainable. How long can the oil companies go on borrowing? This is madness.

The price will have to correct and when it corrects by doubling, cost of food, transport and electricity will go sky high. A majority of people's incomes will go towards simply meeting these costs and people will be forced to reduce spending on new homes, new cars, new tvs, holidays, clothes, etc. The economy will come to a screeching halt.

This is not just an Indian problem, this will be a world problem. The cost of the basics is likely to go so high that people are just not going to be able to afford anything else.

Unless, the world once again gets a new source of cheap energy, quickly.

What can that be? It can only be Nuclear & Coal. I think the planet should start going Nuclear on the double. There is no more time to waste deliberating if it is good or not, it is necessary. Coal fired power has already started, all recent power plants coming up seem to be coal based.

But can all this happen fast enough, or is the planet going to be caught napping and we will end up with 7 to 10 very hard years. Well, we'll find out in early 2009 by which time oil should have crossed $200.

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