If oil experts agree on one thing, it is that there is no infallible crystal ball to predict oil prices. As of now, this is a hopeless underestimate.

Doomsters are not lagging behind. Recently the Chairman of Royal Dutch Shell Ron Oxburgh predicted a price of $150 a barrel. At that rate it could even reach $ 200, when alternatives to oil will become more attractive. The peak oil pundits prophesy disaster, with the world oil production declining rapidly from 85 million barrels a day, even as the demand swells to 115 million billion per day by 2030.

There is some similarity between the warning of impending disaster of global warming and the increasing uncertainty surrounding oil pricing. In the case of global warming, there are still some sceptics who question the science behind it. The US administration is reluctant to order much stricter norms for greenhouse gas emissions, fearing an irreversible economic decline.

Political difficulties
It is politically difficult for the state to mandate drastic increases in fuel efficiency for cars and trucks, since the powerful auto industry is bound to suffer losses through such requirements. Americans have become too addicted to fuel guzzling personal cars to accept wartime deprivation in such matters.

India is unlucky because its economy has just reached the take-off stage when oil is no longer abundant and cheap. But we are lucky that the Western model of feverishly emulative consumerism has not yet spread among our people, most of whom are poor. Indians who can revert to a simpler life-style in the era of stringent oil supplies without suffering the pangs that richer countries will endure.

Even with the billowing numbers of two-wheelers, India is well behind the West in the number of motor vehicles. Instead of seeking to boost automobiles for road transport, which entails a hugely increased demand for oil, we should be focussing on reducing indigence among millions of marginalised Indians, Plans apart, the reality is that more national resources go into the urban sector rather than the rural. This leads to higher spurts of energy consumption. If our villages can be made more attractive economic entities, the consumption of energy on long-range transport will be less wasteful.

Planning and actual policy are different. India has singly failed in its energy pricing, which has become irrational and inefficient due to the politics of competitive populism. The state has failed to lessen energy usage efficiently through pricing signals. Worse still, it has patched up a subsidy superstructure which siphons off what we estimate at about Rs 90,000 crore per annum.

Modification
Unless this superstructure is drastically modified, India will never be able to achieve significant levels of energy efficiency. As crude oil prices soar upward beyond India’s affordability, chaos and violence will threaten to reverse the rise of India.While urging an overhaul of energy subsidies, we do not overlook the country’s responsibility to help the poor to improve their lot.

The Planning Commission’s brief for an Integrated Energy Policy was prepared when the trend of world oil prices was within the range of $40 per barrel. It had failed to consider a scenario of high oil prices. Since then, with prices close to double that figure, the expanding middle classes are avid for more oil. India's policy framework needs to be totally reconsidered, factoring the elevated crude oil prices.

Such comprehensive and radical policy planning is admittedly difficult in a pluralistic country with many states at very different stages of economic growth.

But the centre should widely disseminate the true picture of India’s parlous energy deficit, especially in imported oil, and galvanise all regions and sections of the people so that we can dismantle energy subsidies and adapt the vital strengths of the country to a development model of significantly reduced oil
consumption.