Is there any escape route from rising inflation around the world, oil prices somewhat on the boil and an attendant recession? The economic turmoil has hit a number of nations so hard that a large number of people, especially Indians who make up one-fifth of the global population, find that survival of the poor and even not so poor is at stake. It does not augur well for the immediate future or even a distant one. Because once prices of the basic needs of the people rise, they rarely, if ever, come down even if there is a marginal correction of sorts, now and then.
Or will a degree of sanity prevail among the hotheads of the world who control the energy taps? Will they call a halt to their greed and give the world a breather from the economic turmoil that has triggered the crisis prevailing today? Will the crisis be accentuated as new drums of war are being rolled in the Gulf region, threatening closure of the Straits of Hormuz by Iran in the face of a possible attack, cutting of the petroleum shipping routes and supply lines? The hawks blow hot one day and blow cold the next, leaving everyone in suspense, forcing the leaders of the world, especially of poor nations like India with 30 to 40 per cent of its populace below the poverty line, to keep their fingers crossed and hope for the best. What is the way out? Is it a gridlock? Or is there light at the end of the tunnel? Nobody knows. Nobody, even one endowed with the best brain on this planet, could take a wager and predict the next move with any degree of confidence. No soothsayer, and India has plenty of them, could stand up and speak for sure about tomorrow, the next week or next month or the New Year, leave alone the next decade.
But suddenly a slight ray of hope is crashing through the dense and dark clouds overhead. But it is hard to tell if this ray will continue or it will vanish as soon as it has crossed the horizon. When the all powerful Group of Eight, the mighty rich nations of the world were conferring, wining and dining in Japan in early July, suddenly out of the blue, the price of oil dropped from $147 per barrel by $9 in a single day so that they could talk about saving the world in peace rather than ponder over the awesome trends they had been witness to. Soon after they dispersed, the petroleum started rising slowly, if not rapidly. There was flip flop, up and down every other day and on July 21, it was ruling below $130 per barrel.
Has it given the world some relief? Perhaps not yet because fear lingers and hope is somewhat dormant. Because no one knows if by the end of July, the oil prices will go into the shock mode or the gentle one. One reason might have been that Iran immediately offered to hold talks on its nuclear programme it calls energy oriented and thereby peaceful; but it insisted that it will not stop nuclear enrichment nor dismantle its centrifuges because its intentions are entirely peaceful. Iran's detractors equally firmly assert that its objectives are not peaceful, but they accept that Iran will not be a nuclear weapons state for another ten years. But ten years is not a long time in their perceptions. So the war of words continues. With the American 6th Fleet stationed in the West Asian region and the 7th Fleet in the Indian Ocean and Israel ever ready to strike Iranian nuclear facilities, the war games are on and the oil prices are instantly affected and start to boil. That is the name of the game. The oil cartel blames speculators on the commodity markets around the world, especially the west, for the rise and fall in oil prices and there are dark hints that the upcoming American Presidential election and high gas prices in the US are hurting the voters a great deal and their driving habits, their cooling needs in the dreadful summer and heating needs in the brutal winter months could influence the way they would press the button on the voting machine.
So, do the speculators listen to the rulers of the day and an extra dime or less to comply with the desires of the political and trading bosses? The guess, one way or the other, is as good as it is bad. But it is like the casino, like the horse race, like the betting in any game, be it football or cricket. So the Indians, are they mere spectators with no say in the oil market and its prices even as they depend for 70 per cent of imported energy for their needs, for their hearth and home and for their movements out of the home?
The American sub prime crisis with enormous debt defaults might have started more than two years ago, but as there is no end to it yet, it is continuing to hurt the world, including India. One American bank has collapsed, two German banks have failed and British banks are in pain and so are they around the world. Even two Indian banks have had to pay the liabilities they incurred on behalf of fellow American bankers as all the hedge funds there folded up after failing to honour their commitments. The largest American bank, with widespread operations in India, is continuing in grave crisis. That adds to the energy crisis and oil prices as the dollar continues to tumble in the world market. The rupee may be stronger than earlier, but there is a price to pay for it in terms of high energy costs which have tripled in less than a year and risen five times in less than two years. That is why people in India have to pay more for everything they buy and pay more interest on the abode they might have acquired and mortgaged it to the bank. That is why many an Indian is taking the bus or the train to work rather than going by his or her personal transport as is the American who is now using the bicycle and driving millions of miles less than ever before.
Lalit Sethi, NPA
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