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What could go wrong if petroleum product prices are decontrolled?

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What could go wrong if petroleum product prices are decontrolled?

Post  Admin on Tue Feb 16, 2010 12:35 am

Some believe that it is important to subsidise the fuel purchases of poor people, either because it makes economic sense or because it makes political sense.
It could be argued that world oil prices are subject to short-term shocks. It could then be claimed that government can help by absorbing short-term fluctuations and giving the private sector a more stable environment.
It could be argued that floating rates for petroleum products will generate inflation or inflation volatility.
What is your say??

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Oil prices should not be decontrolled.

Post  Pankaj Pareek on Tue Feb 16, 2010 1:09 am

During the 1991-1994 the oil prices were very stable and that actually helped us to implement liberalization quite easily (refer Indian Economy by Misra and Puri Chapter 60). Thus oil prices play a very important role in implementing economy reforms also. If oil prices are not decontrolled then it would be subjected to high fluctuations which will not only impact the poor people but also small and large enterprises and stock market. This may bring instability in the economy. By decontrolling the prices we will expose economy to high risk. The prices of commodities will also fluctuate and and may lead to inflation. Also there seems to be no incentive for decontrolling the oil prices as the extra burden that government is bearing will be passed to people and eventually will decrease the purchasing power of people and thus savings and investments resulting into back-fire to government.

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Re: What could go wrong if petroleum product prices are decontrolled?

Post  Ami on Sun Feb 21, 2010 2:03 am

hey guys...i found a nice PDF on net about the Kirit Parikh Committee recommendation...do have a look..

Click here

Any comments invited.

-Ami

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Re: What could go wrong if petroleum product prices are decontrolled?

Post  Ami on Sun Feb 21, 2010 2:17 am

To understand the concept of Deregulation in Oil you can read this PDF. Nice one giving major points in brief.

-Ami

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Re: What could go wrong if petroleum product prices are decontrolled?

Post  Admin on Sun Feb 21, 2010 2:23 am

Another link for reference:

Oil Deregulation

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Re: What could go wrong if petroleum product prices are decontrolled?

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