Date:14/05/2008 URL: http://www.thehindu.com/2008/05/14/stories/2008051453131001.htm

Opinion - Letters to the Editor

Oil prices

The editorial “Behind the oil price spike” (May 12) says the rise in oil prices is mainly due to the declining value of the dollar and speculation. While the dollar has fallen against the euro in the past one year, it has been quite resilient against most other global currencies. Further, historically, there has been no strong correlation between the strength of the dollar and the price of oil. The role of speculators may also be exaggerated. As Paul Krugman points out in his latest article “The oil nonbubble,” the telltale signs of speculators in action are not there in today’s oil market.

Given this, one must a take a good, hard look at the fundamentals of demand and supply. Oil supply has been mostly flat since 2005. As Jeffrey Brown — a petroleum geologist — has theorised in The Export Land Model, a major cause for the spurt in oil prices has to be the bidding for declining net exports among oil-importing countries. This does not portend well for countries such as India. The decline in net exports cannot be easily reversed and the situation is likely to turn dire in a few years. We need to embark on a mission to manage demand while developing renewable energy solutions for the vast majority.

Vinay Kumar,

Udupi

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It is alarming to read that the cost of crude oil, which is over $120 a barrel is expected to peak at $200 a barrel within next year. It is unfortunate that neither the policymakers nor the people have realised its impact on the economy. Rationing of petrol, diesel and kerosene appears to be one of the options. Secondly, the government should drastically cut down the luxury of long caravan of cars when VIPs move from place to place. Thirdly, there is an urgent need to take up projects to increase public transport. Fourthly, there should be severe restrictions on air travel.

Commander (retd.) M.V. Vasudevan,

Hyderabad

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The oil market and extraction situation are dangerously poised from an economic, social and political perspective. We are either at, or very near, the point of global peak oil extraction. From now on, the world will have to make do with less and less oil. It is a geological reality that we cannot deny.

Suyodh Rao,

Hyderabad