The present oil prices form an index for petroleum imports into developing countries. If prices continue rising, the index will rise as earlier long term contracts, at lower prices, run their course. In emergent economies across the developing world, there are concerns about the autonomy of public sector undertakings involved with distribution of fuel. In some countries, governmental support in the form of subsidies on oil prices, shields people from the effects of fluctuating world prices of oil.
This really puts a burden on the concerned government organizations, as they are unable to realize the actual costs borne – they continue with heavy losses. There is a need for policy to ...
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...include autonomy for public utilities so that they can fix retail costs of transportation (petroleum and diesel) and cooking (LPG and kerosene) based on current market rates. Besides, in these countries, public sector oil companies face drawbacks arising out of the constricting nature of government machinery. These companies are not allowed to trade in international oil markets through spot and future options.
The underlying reason for this is that the fear of accountability prevents a bureaucratic set up from encouraging a culture, which allows new initiatives and genuine mistakes. Global oil trading is a specialized job, which also requires a blend of experience. If trading had been allowed, the present world oil crisis would have been better tackled. (Dos, 2005) The focal issue, however, concerns the spread of costs equitably among all the stakeholders – public sector oil companies, consumers, governments local and national. In some emerging economies, the government oil companies are split into two halves, marketing and refining.
Subsidies on consumers tend to ignore the fact that refining costs tend to rise in tandem with world oil prices. The reason for splitting operations – equitable distribution of costs – no longer is valid in the present situation as refining costs have gone through the roof putting a heavy burden on these public sector companies. The company tried to offset huge losses. Thus, companies are involved in marketing by-products, such as lubricants and gasoline. There is a real fear that public sector utilities will go bankrupt if retail prices do not keep pace with world oil markets.
As it is, cooking gas and petroleum is distributed much below market prices in some countries. The government suffers heavy losses and petrol taxes are the result. Running out of Oil and Time is a Los Angeles Times Editorial by Paul Rogers published on March 7, 2004. The focal point of this text is mainly about the ever-increasing demand of oil juxtaposed with ever decreasing supply of oil. However, it should be mentioned that Rogers indicates that with development of innovative technological help this situation can be negated.
However, the focus remains under the parameters of problems related to oil supply and provides little solution and relatively low amount of analytical approach. (Dollard, 2006) It can be stated that this article is chiefly a ‘problem indicating’ text and in doing so the writer provides a wide range of data with supporting facts and figures but little is presented in terms of analysis of those data, facts and figures. The writer mentions, “Today, despite astonishing advances in exploration and production technology, the industry is finding just 12 billion new barrels of oil each year — less than half of what we use.
This is one reason that oil prices, which had averaged $20 a barrel since the 1970s, have been hovering at $30 for nearly a year. ” (Roberts, 2003, 8) These facts and figures are important for an article such as this as it can well be mentioned that these are the basic strong points of the article. However, there are no further analyses of the future developments in the oil industry in relation to fiscal market or its implication in the global market scenario.
It is true that the writer’s intention is to warn the readers about the upcoming crisis in the oil business but it is a fact that the writer is more dependent on data rather than personal synthesis of the entire scenario. It is a fact that the oil crisis of the Middle East is no easy problem to be solved and there are too many variables related to this issue that need to be addressed and evaluated. However, the writer points out some of these variables but fails to move deep into those subjects and this could be termed as the basic weakness of the article.
As an example it could be stated that the writer indicates that the political imbalance in the Middle East could deepen the crisis mentioning that the “Western analysts have long feared that the Saudis and other oil-state leaders are too corrupt, unstable and bankrupt to step up their oil production fast enough to meet surging world demand”. (Roberts, 2003, 10) Here too the social and political along with its far reached economical significance is overlooked as the writer promptly directs himself towards the parameters of Asian demand for oil and leaves out the oil politics of the Middle East.