The economy of Petrol price hike

A Rs.7.50 rise in petrol price seems whopping by any standards, and after periodical increments in fuel prices in recent times, petrol cost is now in excess of Rs 75 a liter across India. I am not an economist, and I wouldn’t understand the nuances of national economy but I understand that cost of anything is based on the simple rule of ‘demand and supply’. I think most of us as aware of this little fact.  Sometime probably in the seventies, my father owned a scooter, which he used only on Sundays to take us on pleasure rides just because he couldn’t afford petrol at Rs 8 a liter for daily use. And now, even at Rs 77-78 a litre, I’m sure the teenagers won’t hesitate to zoom their bikes across the towns for no reason at all. Even my dad, now retired, and unlike in the seventies, won’t hesitate to use his self-start scooter for his needs. So, for my dad, petrol in the seventies, @ Rs 8 a liter was much more expensive than it is @ 77 a liter now. I’m sure this little calculation would apply to almost all of us. Just look at the roads- Fully choked with traffic at all hours, and impossible to maneuver through, during the peak hours. I’m sure this is not going to change, the compulsory whimpering among the masses after every price rise notwithstanding, and the traffic conditions, and hence the air-pollution conditions, and hence the sedentary lifestyle-related diseases would continue to be on the rise. Automobile manufacturers proudly announce their sales growth each year saying that sold these many more thousand units of their vehicles this year compared to last year. I touched my first automated two-wheeler at the age 24. These days children as young as 11 years drive activas and whatnots. And now imagine the situation if the fuel prices were to reduce to Rs 50 a liter, something I think most of us dream of happening if we changed the government at the center. Vehicle manufacturers would increase their production even more thinking that there would be more purchases owning to cheap fuel costs. People would choke the roads even more with their vehicles. Is this what we really want? The fuel prices would drop automatically if the consumption falls. Just for the sake of imagination, think what would happen if ALL of the bikes on the roads are replaced by bi-cycles, and the number of cars are reduced to about 25%. Less consumption of fuel would lead to stock-piling and that would lead to reduction in prices! So, in a way, we, the consumers, are the only ones responsible for the increase in the fuel cost! Everyone wants to use a vehicle but does not want to pay the market price of his fuel, something that gets decided by consumers like them! I have seen people comparing fuel prices in India with that in other countries. How can this be justified when the gross economy of every country is different? We all go for vacationing in foreign countries. Do we not notice the difference in prices of various commodities? Then why not fuel? In Singapore, a one liter bottle of mineral water costs Rs 90 in INR. See? In the middle-east water  is more expensive than fuel. 

Another thing: We all customarily fume at every rise in fuel prices. I don’t. Am I a millionaire? No, but for me, economy has always been RELATIVE. My economic position in the Indian society will remain the SAME even after the price rise because the price rise will affect ALL of the society, and not just me. I’d have been damn worried if the price rise had affected just me and not my neighbor, coz then, my neighbor would get a chance to be richer than me by spending lesser than me on fuel consumption! Everybody would adjust economically to the price rise in their own ways, but the economic sum-effect of the price rise would remain the SAME across the society. Some, who can do without the use of vehicles, would find an alternate way to travel, such as car-pool or metro trains. Others who cannot reduce fuel consumption, would reduce their expenses in other things like cutting out on ice-creams after dinner. What I mean to say is, in the end, a societal commodity becoming expensive does not change the gross appearance of the economy, because it affects all the members of that society in equal way. As I said, economy is always relative. For my dad, at Rs 8 a liter, petrol was far more expensive in the seventies that it is at Rs.77 a liter now.