FM blames speculators for crude oil price above $60

Chidambaram, who had last month asked the oil cartel to regulate crude prices within a specified band, said there was conclusive evidence that futures trading and speculators were driving the prices.

"We are completely convinced that any price above $60 a barrel is speculative element," he said here.

Chidambaram had mooted the idea of price band at a meeting called by oil kingpin Saudi Arabia of oil producers and consumers in Jeddah last month.

"There is evidence for that (speculative trading contributing to oil price spike). There is enormous literature and I had gone through it myself before I went to Jeddah," he said in an interview.

India had to raise petrol, diesel and domestic LPG prices due to spike in global oil prices that had put a Rs 2,46,000 crore burden on state-run firms. But the hike of Rs 5 a litre in petrol, Rs 3 per litre in diesel and Rs 50 per 14.2-kg LPG cylinder was one-fifth of the desired price increase.

Chidambaram said the gap will be met through oil bonds.

Even after the price increase and duty cuts, Indian Oil Corporation, Bharat Petroleum and Hindustan Petroleum are projected to lose Rs 2,22,785 crore in revenues this fiscal. The finance ministry had at the time of June 4 price-hike made a commitment to provide Rs 94,000 crore worth of oil bonds to state-run oil companies. Upstream firms like ONGC and OIL were to contribute Rs 48,000 crore.

Chidambaram refused to make any comments on whether prices will be raised again. "I cannot speak about the price rise because that's not my province. It is the province of the Ministry of Petroleum and eventually the Cabinet."

State-run retailers currently lose Rs 16.70 per litre on petrol, Rs 27.61 on diesel, Rs 38.09 on kerosene and Rs 338.53 per LPG cylinder.

The finance minister said he was not surprised that the Organisation of Petroleum Exporting Countries (OPEC) rejected India's call for fixing a price band. "I was not surprised because that was the meeting of oil producers and effectively only two consumers, India and China were present."

"I did not expect instant support for the suggestion, but I wanted to put it on the table that this is the way out," he said.

Asked why the government did not anticipate the rise in international oil prices, Chidambaram said no one in the world had anticipated crude crossing $100 per barrel.

"No one in 2007 would have said that oil would cross $100 a barrel. I had never heard anyone utter a number more than $100 a barrel. It touched $147 (this month)," he said.