Jan 24, 2011

15 Petrol could reach Rs. 100/Litre in India. What the #&(@..!!

With petrol prices reaching unprecedented levels in India, What can the Govt. do? What can we do? What do I plan to do..

After getting a car, I have rarely used my motorcycle to commute or go shopping with my wife. Probably it’s good for the biker in me, since now I view motorcycling as a leisure/pleasure activity and not just merely for commuting. But with petrol prices hitting record highs, how long can we afford to take pleasure burning the precious resource?

In my early teen days (early 1990’s), I occasionally used to accompany my dad to the neighborhood petrol pump to tank up our Bajaj Scooter.

The 1990-91 was also the time of the Gulf war, when Saddam Hussain had invaded Kuwait. For the first time in human history, people watched the the war almost live on cable TV (courtesy CNN). But more significantly what followed the Gulf war was a sharp rise in Global petrol prices.

Back in those Gulf War days I faintly remember my dad shelling out around 22-25 odd rupees for a litre of petrol (along with the 2T Oil).

Flash forward 2011 and the petrol prices are now around the Rs. 60 per litre mark..!!

Nearly 200% increase in petrol prices in the last 20 years..!! And one thought that the Gulf war was bad enough..!!

The price rise has been most steep in the last couple of years. Given the current state of affairs, I suspect the price of petrol in India will touch the Rs. 100 per litre mark in 4-5 years time very easily.

Why is the price of petrol rising so rapidly in India?

1. Demand and supply

Petrol comes from crude oil, a natural resource found deep below the earth’s crust, formed by the remains of plants and animals which died millions of years ago.

Now since there is a limit to the amount of biological matter which thrived on the earth millions of years ago, there is naturally a limit to which the earth has stock of crude in its belly.

Lets keep in mind that India puts around a million (10 lakhs) of 2 wheelers every single month. Now just imagine the demand for petrol that keeps piling up each year.

There is simple law in economics: "When the demand is more and supply is limited, the price is bound to increase".

2. The vote bank policies of our politicians

If there is an increase in prices of Diesel, Kerosene or Cooking (LPG) Gas by just a couple of rupees, you can be sure that there will be a country wide protest/bandh against the ruling Govt. the very next day.

According to the opposition, how can the govt. be so uncouth by not caring for the "aam aadmi" (common man)? After all the diesel is used by farmers on their tractors and the Kerosene and LPG gas by the common man to cook. The prices of these "aam aadmi" fuels are therefore kept in check so that the Govt. doesn’t topple over.

But then Petrol, Diesel, Kerosene, LPG all are basically byproducts of the refining process of the same Crude Oil. Ideally there should not be much of a difference in the price incurred during the refining of these by products.

So in order to protect the vote bank, these "aam aadmi" fuels are subsidized/protected/shielded by the Govt. The result, Petrol prices keeps on increasing. A friend of mine who works in an Oil Company, says that LPG should actually be priced at around Rs. 500-550 per cylinder in India instead of the current Rs. 350 (approx.) per cylinder..!!

What can the Govt. do?

1. Invest in infrastructure and Public conveyance: If there is a reliable and comfortable bus/metro service which can take you to your work place in faster time, then people would naturally prefer to use them for commuting rather than use their personal vehicles.

2. Encourage the use of vehicles which run on alternative energy sources: Electric cars/2 wheelers are beginning to appear in the market, but the current prices of these vehicles are still not attractive enough for the common people. Govt. should encourage the use of these vehicles by slashing the duties on these vehicles and also encourage our domestic companies to invest in R&D of such products which do not run on fossil fuel.

What can we do?

1. Limit the use of personal vehicles: Carpooling is one way of reducing our fuel bills (if not care for the environment and the depleting crude oil reserves). If possible use bicycles to work or for short commutes.

2. Switch off out vehicles at traffic stop: This is one small practice which is not followed by most of us. According to my friend who works in an Oil company, this small practice can lead to saving of huge amounts of fuel in a country like India in which millions of vehicles ply on the road.

3. Don’t keep the engine on just to keep the AC working: I have often seen swanky, fuel guzzling cars parked without passengers in the summer with the engine on, so that the AC keeps the interiors cool. People who do this should be penalized according to me.

What I plan to do

1. Cycle to work: My one way commute to the workplace is a 6.5 Km trip. Which means every day I have to cover around 13-14 kms (which incidentally is the fuel efficiency figure of my car) to work. The fuel bills have made me realize that by not taking the car to my workplace, I would be saving around 20-24 litres of petrol every month. And to cycle 6 odd kms (one way) is definitely not difficult. Plus it would be good exercise for someone who is in his thirties.

Fuel prices are bound to increase in the future and we have no control over them. But with judicious use, we can definitely try to extend the period over which this fossil fuel would be viable to be used.

I clearly see telling my grandchildren stories of those times in which motorcycles used to run on something called Petrol..!!

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This is to remind that the Views or Opinions in the blog are entirely mine unless explicitly stated. The Views and Opinions published in this blog should in no way be related to any other person or organization associated -- directly or indirectly -- with me.


Siddharth Soni said...

If you were to go by Jeff Rubin's prognosis, a litre of petrol will hit Rs100 in another 2 years max, not 4-5 years. Brace yourself.

I simply feel that people in most parts of the world are simply not informed enough about the dynamics of non-renewable energy sources like petroleum. How can manufacturers continue to sell so many cars? (I am guilty of buying one!) And how can the government continue to support these automobile manufacturers in selling cars when one can foresee that the current auto-technologies will be left useless in just a few years' time? It's quite unimaginable!

Anonymous said...

I see that OPEC Controls the prices, as long as we are heavily dependent onoil producing Gulf countries, prices of the entire world will be controlled by them. Which in turn is linked to world economy and currency inflation/deflation.

There are a huge quantity of oil that is produced by Ambani bothers are sold to Africa, if Ambani sells them to India or if IOC takes them over, we will be not at OPEC's mercy as much as we are now.

I wish Reliance were as patriotic, I say this cause I have worked with Reliance.

Anonymous said...

A timely and detailed post. All the points you mentioned:
- Using alternate energy/ bicycle
- improving public transportation
are 100% valid. All are good for our country and individual persons in future.
There are some points - hope you all might guess - apart from these.
- Crude oil exchange trading by some of the powerful bodies.
- Our Govt. policy on Taxing the Petrol which is absolutely questionable.
Anyway Alternative energy is going to emerge a major field in coming days.
- jagan

Rajya Vardhan Mishra said...

This 1 was really really informative. Thank u :)
I guess you should write on 'Best Practices of Biking' as well.

Best Regards
Rajya Vardhan Mishra

Sankoobaba said...

i cant ride bicycle to work..20 kms one way!!!
but I will get my rusting bicycle serviced so that I can use it for small errands on smaller distances..or maybe I will get a new bicycle.. as I am sure once.. petrol reaches 100rs/litre.. bicycle prices will shoot up very marginally at least..
one can also save fuel by riding not faster than 70kmph.. ideally 40-50 kmph will save more..but sometimes on highway we need to ride faster..

also using a longer traffic free route is better than shorter crowded route...it saves fuel..

praveen said...

Govt should cut off or reduce the customs, excise, sales, service tax so the petrol will cost around RS.30-35, or they should encourage the manufactures to develop and innovate a new tecnology using renewable sources like solar power, and tidal energy(electric powered engines).

S.P - Biker Next Door said...

Thanks for sharing your thoughts guys.

Initiatives like cycling daily over long distances/extreme heat & cold/rains would certainly be not possible. Will post once I get a cycle for myself.

But yes every small step taken by us would contribute to lengthening the period over which Petrol would be viable to be bought and used.

Ritesh Sharma said...

Dear Payeng!

Very well written!
Hats off to you!
Thanks for sharing the invaluable details....

Ritesh Sharma

Gautam said...

Here is a native phrase "Dath Korun Pot Bharat Nahi"
Go 2 google and search its meaning.

All these things like exchange rates & Reliance become patriotic is just temporary ways to divert from main issue. Making public transport efficient and using cycle to work makes some little sense, but hugely unadequate to our demand suply scenario. For long run they will become meaningless.

As per some scholars, only use of renewable energy could become substitute to fossile fuels. So lets hope our grandchilds rides on bike, which works on water or air...

(Did anyone noticed Tata's effort in europe for making a car running on compressed air? The highlight of the system is that, the compressor which fills the high pressure air cylinder, works on wind turbine.... Means total no use of fossiles!)

sau007007 said...

I like electric cars made by Tesla Motors but they are highly expensive.
I dont like electric bikes/scoties in India.
Its good to use petrol for a bike which gives above 45kmpl.
:-) :-)
But worst for big cars and SUVs.
The government should rather apply big tax on them as for a owner giving Rs. 60-70 will not be big.
:-) :-)
And it would also control the existing prices...

ramakrishna said...


indian bike reviews said...

finding alternatives also makes sense, but valuable vehicles which run on petrol should ve to be done something with them

Anonymous said...

may be its the time of an era where we can't do nothing to stop our developing world from which, it continues to end all of mother nature's vastly diminishing resources of fossil fuels......
And we continue to laugh or cry about the situations that we must deal inevitably only to fire up our own mother land to its ashes......We are only preparing ourselves to destroy the nature's paradise just to search for stinking holes that will not just ruin the land, air and water that we are sourrounded of.....but we ourselves will fix and implement the D-day which was only in fantasis or predictions to reality of death of allkinds of life......

May be just like a petrol or diesel we will most probably perish into stinking death on one of natures ultimate{though it is unfortunate for human mankind} finest morning ever recorded in history........

AMG said...

Ever heard of Altius Scimitar.

Good. Now pray with me that it becomes a reality.

Somnath Ghosh said...

Dear Payeng!!
your blog is awesome, but you know if you told this things yo a normal people he will understand but minister in our country they they are god so what they are doing is exactly wright, you can't tell them to do so.

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