While everyone has had a hearty laugh dismissing the union oil minister Veerappa Moily earlier suggestion that petrol pumps be closed in order to curb fuel demand, not everything that he laid on the table is bad economics. While it is true that shutting down fuel stations to regulate demand and supply of crude oil, with its price escalating by the day, is a preposterous idea, the country must brace for some austerity measures to counter the fuel crisis that is looming, particularly in the wake of a US-led military intervention in Syria, that directly threatens to send the oil prices through the roof.
As the government battles an unprecedented steep fall in the rupee value, while also fencing off chronic inflation and economic stagnation, the latest blow that can seriously destabilise the system may come in the form of substantially withdrawn fuel subsidy. Moreover, a fuel conservation drive, to be announced by the minister in the middle of this month, is not an out of the mark proposal, given the rank abuse of petrol and diesel, over import of foreign cars and cost of air pollution that are collectively responsible for worsening the situation at home.
It is in the light of this crisis that Moily’s idea to import more oil from Iran, instead of the US, begins to look like a good and doable idea, even though it would straight away drive a wedge through Indo-US relations. With the rupee tanking against the dollar, India needs to pay far more per barrel to the US, but in case it starts buying more oil from ‘crude powers’ like Iran, and even Syria, it can substantially mitigate the effects of the currency crash. Since India needs to reduce imports of gold, silver , while also curbing demand for oil to contain the current account deficit at $70-billion for the fiscal year ending March, or about 3.7 per cent of the GDP, buying oil from non-dollar-priced sources does look like an option that would work in India’s favour.