By K Raveendran
The behaviour of fuel prices in India is falling into a regular pattern. Three distinct patterns emerge, relative to elections in the country in the price movement of petroleum products. These phases fall into pre-election, election and post-election scenarios. The pattern has been repeating itself ad nauseam even as the government claims that the prices are a function of the market forces and neither government nor the producing and marketing companies have any role in them.
With the results of by-elections to three Lok Sabha and 29 assembly elections in 11 states already out and a crucial round of regular assembly elections in some of the most important states, including Uttar Pradesh, around the corner, on the one hand, and international crude prices on a relentless climb, on the other, all the conditions required for the pre-election phase to begin play have been fulfilled. And this means that the second phase is on its way.
From past experience, the second phase is invariably accompanied by the government pulling the wool over people’s eyes by making ‘friendly’ adjustments in prices so that these become more acceptable to people. There will be no official order going out from the government to the retailing companies. But it is a given that the companies will do what is expected of them: voluntarily refrain from increasing the prices although there is no change in the behaviour of crude prices.
But if you think that companies are obliging the consumers by holding the prices, you will have to learn the hard way later that it was not so. This is merely a hide and seek game between the oil companies and the government. When the game is over, everything will be back to normal and the companies will recoup more than what they had had given up, but in the process the government will have reaped the benefit of a more favourable public opinion, which it hopes will translate into more votes.
The relentless spike in the fuel prices, on a daily basis, has caused much resentment among the people and the reverberations of the discontent are felt even within the ruling party members. The situation has become so bad that they will find it difficult for them to face the people, who may be in a position to teach a lesson or two to the government and the ruling parties. But for the oil companies, it does not make any difference because they will always have the best of both worlds.
Unlike some previous occasions, the news coming from the international markets are not at all helpful. The market is expected to continue bullish momentum as it expects no drastic policy changes at the forthcoming meeting of the OPEC+ cartel. The market has ignored certain bearish developments such as those emerging from China, which is set to decide release of oil products from state reserves and a general deterioration in the Covid situation in Europe. Traders expect prices to brush off the bearish sentiments and remain robust as the OPEC+ meeting approaches.
The market expects OPEC+ to keep its supply policy unchanged and oil prices to therefore stay buoyant when it meets this week, a development that will maintain supply tightness and the bullish price sentiment.
Analysts say calls from refiners and from the US President himself to alleviate the tight oil supply environment are not expected to be answered by OPEC+ producers, as both heavyweight policy drivers Saudi Arabia and Russia have been vocal about wanting to wait out the short-term market tightness. Instead of pumping more supply, OPEC+ will likely stay behind the demand curve, rather than risk jumping ahead and getting burned.
All this is bad news for people. With neither the market nor the government, or for that matter, the oil companies in a mood to help, their days ahead will be filled with more worries and empty pockets as both the government and the companies will be back with their diabolical game of cheating the public for the relatively brief period of elections.
While there has been much talk about petroleum products being brought under the GST regime, which would have drastically reduce the tax payable by the consumers, both the central government as well as the state governments, irrespective of the party in power, are not ready to do that as they will be forgoing their best opportunity to fleece consumers and go on making money, merrily and mercilessly. (IPA Service)