New Delhi, 5th April 2007.
Petroleum prices have started racing to $70 a barrel after staying below $60 for the better part of the winter, now coming to an end around the world. What does this portend? Does it signal that the good times are over and recession is about to be triggered in America and a number of advanced countries? The housing boom in the US is beginning to bust and a crisis is looming on the horizon. This has already created a degree of concern, if not alarm, around the world, including India.
How does it affect India and the rest of the world? Because the US dollar value is being eroded and the rupee, yen, euro, Chinese and several other currencies are being valued upwards, there is an implied cushioning of the high petroleum prices, but exporters are losers in cheaper dollars as they earn fewer rupees. The worst affected are the outsourcing companies engaged in providing information technology through service centers as well as call centers, which cover a wide spectrum of the industry.
There is no great relief as there is a downside in the face of America's confrontation with Iran, which is the second largest exporter of oil in the Organization of Petroleum Exporting Countries or OPEC. Iran is displaying its anger by threatening to shut off its oil and gas taps and has already reduced supplies, especially after imposition of U.N. sanctions and threat of increased sanctions.
To India, Iran has already conveyed that the gas available to it is one third of the original offer of massive supplies. The Iran-Pakistan-
India depends on external energy sources at a very high level of 70 per cent, though oilfields purchased or leased overseas are expected to meet 20 per cent of the needs. The remaining 50 per cent of energy needs, including high quality coal, have to be imported through commercial contracts. India's import bill in the bygone financial year was around $50 billion, but with rising petroleum prices, it could go up by 15 billion in the current year. The energy scenario is very volatile indeed and governed by hawks and they wish to cash in on the limited time they have at their disposal, say until the middle of the 21 st century for oil and gas wells to dry up, though new discoveries in untapped countries as well as the Gulf, could change the picture.
In spite of the rising demand for energy, India is looking for alternative sources, including ethanol from as far afield as Brazil by negotiating leases for huge sugarcane farmlands and setting up refining capacities to produce ethanol and biodiesel and ship it to India. Brazil meets 70 per cent of its energy needs from ethanol and many countries, including the US, are trying to catch up as they have huge farmlands available for use for crops other than grains. India has also increased its imports of palm oil from Indonesia and Malaysia for use as edible oils as well as blending of petrol up to five per cent now, to be raised to 10 per cent in ten years. Within India, efforts to grow jatropha, especially in wastelands as the plant needs little water are in the pipeline on a big scale to blend petrol and diesel. Some farms have already been set up, but the effort deserves a bigger push than is being given at this point of time.
If the Iranian-American confrontation does not translate into war, fears of global recession could perhaps be averted. India is anxious that the two sides should end their war of words and patch up for the good of 7 billion human beings of planet earth and billions more in the animal kingdom in forest and trillions of numbers of fish and creatures in the sea, leave alone the exotic birds who live on trees and fly in the skies.
