The Politics Of Oil

To the extent that oil prices anywhere in the world are not entirely an economic issue but perhaps also a political one, this change in approach provides a commentary on the time horizons of successive generations of political leaders. Arguably, if you have a longer-term vision like Mrs Gandhis, which went beyond the Huxleyian here-and-now, you would stop playing ducks and drakes with the oil companies on the one hand, and the treasury on the other. Short-term considerations, like the immediate fall-out, reign supreme only when the politician himself does not know his future beyond the next year or so.

 

That brings up the new era of coalition governments. Different segments of a coalition represent different fractions of capital, representing conflicting interests. In addition, there is a strong and relatively autonomous intermediate regime trade unions are very much a part and parcel of this which will be directly affected by the rise. The demand for petro-products being highly price inelastic (the truck driver will still drive his truck irrespective of the diesel price), an increase in oil prices results in a straight and substantial transfer of income from the consumer to the oil industry. As against this, an increase in the food prices is carried out in a more routine fashion, perhaps because the price increase transfers income to the articulate sections of agrarian capital. That is why politicians, especially those who arent sure of their political futures, are wary of a backlash, real or imagined.

What is equally dangerous is that this brings forth the dangers of free riding by political groups, and this is naturally more pronounced in a coalition where the bargaining strength of political groups is not necessarily commensurate with their political status or power. The policy making that results from such political formations leads to an increasingly discretionary control of politicians over raising resources. And in the most cases this results in huge giveaways to the non-poor, which effectively amounts to underwriting the expenditure of the intermediate regimes.

The only way to ensure that the pursuit of self interest by individuals or political groups is not at the cost of the economy, is to depoliticise such pricing decisions. This is best done by not only dismantling the entire price control mechanism for the oil sector but also by breaking the government monopoly and privatising some or all of the oil companies.