OPEC's collusive predatory practices: Time to show our Economic Nationalism

 When the world is reeling under inflationary pressures, OPEC+ has decided to cut down daily production to ensure that energy prices don't fall too much. Ethanol blending, investing in alternative sources of energy, investment in public infrastructure, strategic increase in oil imports from Russia are some of the measures taken by the government to tackle energy price issues in India. Please take a look at the chart below.

Starting from 2001, the correlation between CPI Inflation and Brent Crude price is very high at 0.65 based on data sourced from investing.com, macrotrends.net, world bank. Close to 85% of India's energy needs are imported from outside India and therefore global demand and supply issues have a potent impact on India's growth ambitions. Whenever there is an increase in crude prices, the costs have to be borne by the government, OMCs or common people, in any case, this is depleting the much required growth capital. The multiplier impact of increase in energy prices is felt across different sectors and there is no virtually no citizen who does not feel the pinch.  

In this context, citizens can also contribute to the inflation cause by using public transport and sharing private vehicles wherever possible. This can have the dual benefit of reducing the demand for fuel as well as the positive impact on climate change. 

The cost of production per barrel for many OPEC+ nations is around $25 per barrel but they want to sell at $90 to $100 per barrel.

It's time to show some economic awareness and nationalism!

Comments

Post a Comment

Popular posts from this blog

How Big Tech Firms have redefined the paradigms of economics!

Not a day passes by without using at least one product or application of the Big Tech companies.  These companies have redefined the long established principles of economics. 1. Networking Effects: Networking effects is the phenomenon where the value of a product increases due to the addition of every new customer/user. The effect of networking in tech industry implies that the company/product which is the 'early mover' has an advantage and the value of the network grows with every additional user. In 'network industries' the equilibrium tends towards a few products and their companies. Consider Microsoft, the predominant operating system of the world. Consumers want to stick to (Microsoft) technologies that are dominant and compatible with all the other users, software and hardware products. Once consumers get used to these applications or products they do not wish to change easily.  Similarly, with Facebook, any new user benefits due to the gigantic network of users a...
Read more

Restating the Neoclassical Theory of Factor Income Distribution

Image
 The Gini Coefficient measures the equality of incomes of the population in an economy. As shown in the image below the % cumulative population is marked on the x-axis and the corresponding cumulative incomes are marked on the y-axis. The red curve showing actual distribution of incomes is called Lorenzo curve and the distance between the line of equality and Lorenzo curve is measured by the Gini coefficient. A score closer to 0 indicates perfect equality whereas a score of 100 indicates perfect inequality. This is a list of 100+ countries sorted by Gini coefficient sourced from https://knoema.com/atlas/ranks/GINI-index It is not surprising for us to note that many of the developing countries are facing high degree of inequality whereas some of the Western European and Scandinavian countries have better income equality. The income inequality in United States is close to that of Uganda and Mongolia! The Neoclassical Theory The traditional neoclassical theory states that factor incom...
Read more

Budget Wishlist 2024

Here's my budget  wish list for 2024: 1 . Universal Basic Income(Support): The total work force of the United States is less than 17 crores using which they are able to generate a real GDP in excess of 20 trillion dollars(2022 wiki). The total workforce of Europe is under 20 crores(2022 wiki). Except for China which has a work force of 78 crores(2022 wiki), no other country has bigger workforce than India which has 55 crores. As per recent KLEMS database of RBI, the workforce number is 64.3 crores but many economists have questioned this number. With the onus on productivity we are moving towards a world in which investments are technology-intensive, definitely not labor intensive. Some economists have envisioned a world where machines take over the bulk of the work load with minimal human intervention. In India, the annual requirement for jobs is around 2 crores whereas job creation per annum is limited to 40 to 50 lakhs in spite of the best efforts of the incumbent government. T...
Read more