New Delhi: An oil shock, reminiscent of 1979 crisis, nearly derailed Asia’s third fastest growing economy as policy-makers spent more time fire-fighting controversies resulting from the absence of a coherent energy plan than taking decisive steps.
If Iranian revolution sent oil shock waves worldwide almost three decades ago, it was speculators ruling the markets in 2008, driving prices to a record high of $147 a barrel on 11 July. Seventy-five per cent import-dependent India scrambled for response as the rally resulted in a sharp rise in inflation and threatened to undo the gains from a 9% GDP growth rate.
With domestic fuel pricing policy in doldrums, the Congress-led Government shied away from taking any stringent action to keep its poll hopes alive in an election year. But when bankruptcy of national oil companies from selling fuel- below-cost looked imminent, it pieced together a for-the-time being response, raising petrol, diesel and domestic cooking gas prices by highest ever rates but no where near the required hike.
Soon, the bubble created by speculators busted when more than clear signs of recessions in the US and Europe emerged, sending crude oil prices tumbling. Crude prices fell by two-thirds ignoring intermittent output cut by oil cartel OPEC, and once again exposing absence of clear energy policy back home.
After “observing” the movements for weeks, petrol and diesel prices were reduced, but an opportunity which should have been used to free fuel pricing from administered control was withered away in the absence of a decisive leadership.