While Indians have been focused on election-time squabbling and the Army’s claim that it has found evidence of the existence of the Yeti, oil prices have begun to climb. US President Donald Trump decided in April that he would not be renewing waivers that permit American allies to continue buying oil from Iran. As a result, oil prices hit $75 a barrel last week, coming down to a little $73 this week.
That is more than 30% higher than they were last year and prices have got about 12% higher in just the last six weeks. Yet at petrol pumps across India, the prices have barely risen. In Delhi, for example, over the last six weeks, according to Reuters, “petrol prices have only risen by 47 paise a litre, or 0.6%”.
Remember, the current government made a big show of reforming India’s approach towards oil prices, insisting that they would be allowed to move as per global rates. So why haven’t prices in India spiked as they have internationally?
The answer is obvious: elections. A huge jump in petrol prices right in the middle of the election campaign would be terrible news for the ruling Bharatiya Janata Party, since it will pinch voters and might remind them of the government’s failures on the economic front. So prices have been kept low.
This is not the first time this has happened. Last year, during elections in the state of Karnataka, petrol prices were tightly controlled. Then, in the days after the polling, prices were immediately ramped up so that the Oil Marketing Companies could recoup some of the losses from the time when they had been forced to sell petrol without adjusting to international prices.
Analysts are suggesting the same might happen again across the country after May 23 when results to the Lok Sabha elections are announced. “Consumers should be ready for a rude shock of a massive jump in retail prices, similar to the level we have seen in the Karnataka state election,” Nitin Goyal, treasurer at the All India Petroleum Dealers Association told Reuters.
That will be an immediate shock, and the very approach goes against what this government has always promised: policy that keeps the country’s best interests in mind over narrow political outcomes.
But there is a larger challenge ahead as well. Trump may have attempted to dampen prices by saying that he had spoken to OPEC, the Organisation of Petroleum Experting Countries, and asking them to increase production. But it seems likely that OPEC, which only recently cut down production, will not change its position immediately.
That means in addition to a massive unemployment problem, an agricultural crisis, the twin-balance sheet problem, poor corporate earnings, a lack of private capital expenditure and the danger of a bad monsoon, whichever party comes to power in June will also have to face high oil prices. Maybe that explains why the Army is cheerfully distracting the country by pointing to tracks in the snow and claiming they came from a snowman.