The way ahead clearly is to subsidise income-poor consumers who cannot afford price rises, rather than deploy administrative fiat in a bid to clamp down on the price spiral. It would simply distort demand and stymie governmental revenue, as well.
Global oil and energy prices are flaring up, amidst rising demand recovery, cartelised production curbs and extreme weather events linked to climate change, and in apprehension of a severe winter in the offing. Benchmark Brent crude prices have risen above $80 a barrel; and investment bank Goldman Sachs‘ forecast is that Brent would hit $90 per barrel well before year-end. This calls for a forward-looking flexible price regime for energy across the board, so that price signals boost efficiency and bring about better allocation of resources too.
The way ahead clearly is to subsidise income-poor consumers who cannot afford price rises, rather than deploy administrative fiat in a bid to clamp down on the price spiral. It would simply distort demand and stymie governmental revenue, as well. In tandem, New Delhi needs to actively seek easing of production curbs by oil cartel Opec and Russia. Buoyant oil prices must not hamper global recovery as the worst of the pandemic now seems behind us. In parallel, we need to be much more proactive to step up flexibility on the energy price front. The way forward is to institute time-of-day tariffs in power, both to discourage usage during peak hours and to better integrate renewable solar power into the electric grid. Smart prepaid meters are vital to put paid to wanton revenue leakage in power distribution. Besides, we need tax efficiency for the main oil products, indeed, across the energy sector, and drive clear of the present high-cost tax-on-tax regime that jacks up logistical costs here.
Meanwhile, the ongoing fuel crisis in Britain seems due to a sudden lack of lorry drivers following exit from the EU; the US surge in oil and gas prices appears to be due to climate-induced supply disruptions and demand surge in its main oil and gas hub. The world needs to move to ultra-low emissions in energy production sooner rather than later. The global community must cooperate to tackle both the energy crisis and address climate change. Investment in green technologies is vital.