The wrong behind

Attacking targets of convenience won’t bring down the retail price of petrol

In terms of irritation they cause, chain mails rank a notch above mere spam because unlike the latter, chain mails are sent by people you know and thought were sensible. Most chain mails are relatively harmless as they ask you to send money or send postcards to fictitious kids with terminal illnesses. They are easily ignored. (The ones that seek blood donors are an honourable exception). But this one exhorts the recipients to mobilise for action, so it merits a little more attention. If you’ve not received it yet, head over to Ceteris Paribus and take a look.

The would be Howard Beale who started this chain mail is angered by the fact that petrol prices in India are higher than those in Pakistan and Malaysia. He asserts that this can’t be simply because of crude oil prices. The villains, according to our Mr Beale, are “the oil companies” who are presumably fleecing the Indian people. So he calls on everyone (in capital letters to compound the irritation) to boycott the petrol pump on September 22nd, 2006, “stick it up their behind”, make the companies choke on their stockpiles and lose 4.6 billion dollars in one day.

Mr Beale is mad as hell, but also very mixed up. Malaysia is an oil producing country. When those Baloch tribesman are not using the transmission pipelines for target practice, Pakistan has the use of its own natural gas in addition to the oil that it imports (and that the Saudis subsidised until recently). India heavily relies on oil imports, which means that rising prices of crude oil have a much sharper impact on India than in countries that less rely on imports.

Here are a couple of reasons why petrol prices are higher — India’s petroleum industry is not fully open to competition and its government subsidises diesel, farmers, railway passengers and others.

And here’s something that may surprise our Mr Beale — petrol retailers make better profit margins when prices are falling gently than when they are rising. In any case, boycotting the pumps on just one day is unlikely to be very effective. People will just buy extra petrol on the previous day.

It is tempting to look for simple solutions and convenient targets. Instead, Mr Beale would do well to start a chain mail seeking the end of subsidies, cross-subsidies and regulations. If he does, I may even break from my long-standing policy of not forwarding chain mails and irritate my friends.

Update: The idea is not even original and is a rip-off of an American scheme. Our Indian Mr Beale didn’t even bother to change the text and the other details. Needless to say it has already been taken apart (via Space for Rent).

Related Links: An analysis of petroleum pricing in India; Kshitij has a list of international petrol prices; in India politics, not economics, decides the price; Congressionally mandated shortages; a look into the retail petrol prices in the UK and in the US.

5 thoughts on “The wrong behind”

  1. What is more likely to happen is for everyone to stockpile, rather than boycott, petrol the day before the revised prices are effective from 🙂

  2. From the email…

    “REMEMBER ONE THING, NOT ONLY IS THE PRICE OF PETROL GOING UP BUT AT THE SAME TIME AIRLINES ARE FORCED TO RAISE THEIR PRICES, TRUCKING COMPANIES ARE FORCED TO RAISE THEIR PRICES WHICH AFFECTS PRICES ON EVERYTHING THAT IS SHIPPED. THINGS LIKE FOOD, CLOTHING, BUILDING SUPPLIES MEDICAL SUPPLIES ETC. WHO PAYS IN THE END? WE DO!”

    Imagine that!

    Who is this nut case? I wonder how this nut case explains the loses borne by Indian oil companies for past few years. No wait. If Exxon is making a zillion dollars so should be IOC and ONGC. Never mind that the oil subsidies are actually delaying the change in behaviour of Indian people dependent on oil and gas to improve energy efficiency and use alternative sources.

  3. LoL, The Acorn responding to a chain mail. That’s new! 😉

    On the topic – I still cannot understand having to pay over 60% of the fuel retail price towards taxes and duties – especially since a lot of freight runs on the road and not on rail – which would effectively be jacking up product prices anyway. Subsidising A and ending up with higher prices of products B to Z is ridiculous.

    Then again, 60% of a product’s price going to the Government is ridiculous! And more so when explained away as a means to limit usage – especially when successive governments are celebrating a consumption led growth.

    The Governmental Petrol Price Fixing (or whatever they call the pseudo-APM now) has generally given more profit to the Oil Companies than losses.

    A more sensible option would be to ask for engines to be swithched when vehicle is idle. We waste a 100,000 litres of Petrol and 95,000 litres of diesel in idling every year(2003 stats).

  4. A very important point is ignored here . Which is petrol bought by AAm Adami is almost 80 % taxed .

    that is he pays 80 Rs tax on 100 Rs petrol (buying price )

    Please confirm the figure.

    This is a solid reason for higer prices. But also we should consider the fact that the same Govt gives the buffer when prices spikes momenterily (it is the Govt who subsidizes oil importing PSUs )
    And I personaly support tax on petrol which is much much difficult to evade than a hike in
    Income tax rate which ( poor salaried class ) people alone pay honestly . (may be because they do not have any other option ) and grossly allows roots to circumvent for (rich ) small and medium class businessmen .

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