where's my oil...

“We are the consumers. We are the by products of life style obsession. We have jobs we hate to buy shit we don’t need…Things we own end up owing us…”

Tyler Durden of Fight Club (Directed by David Fincher) inspires a lot of scepticism in me especially, when I am having nightmares of the rising inflation.

I get dreams like I am riding my Pulsar and suddenly the fuel is over in front of a petrol pump but five kilometres away from home. How cruel! When my monthly fuel budget is already in deficit, I can no longer afford to buy petrol unless I realign my food budget which, too, is about to dry up because of rising food prices. I have to push that 140 KG of machine all the way to home, or better sell it off. When I am about to sell my beloved stead, suddenly I wake up and realize that I am currently in London, far away from the whirlpool of rising prices, but only for a short time.

Prices are rising. Not only in India – everywhere. Indians abroad are wondering why they are not able to save as much foreign currency as they used to a couple of months ago, while Indians in India cringe when they hear rest of the world (Ms Rice) say that hike in food and oil prices is because of the rising demand in India and China, which in theory is true though not the complete answer. One - USA’s bio-fuel programme is turning the grains into fuel and more here.

We (emerging market citizens and developed country citizens) are not doing that bad anyhow. Only our savings are not that much we can boast any longer. Worst hit are those countries where food is the indispensable commodity – the third world. Prime Minister of Haiti resigned when he couldn’t do anything about the rising food prices and about the rioters shouting slogans of ‘We Are Hungry’. Many got killed in Mexico riots. Army is guarding the paddy fields in Africa. Military is baking bread in Egypt. And to make things worse oil is touching $135 per barrel which is not at all a good price, not because it is high, but because it shows an alarming shortage of oil. Such sharp economic turns change the course of future, leaving layman in shock.

In theory - inflation is caused by either of the two shocks – Demand Shock or the Supply Shock. Demand Shock, as the term sounds like, is a sudden sharp increase in the demand of a commodity which drives the price higher, which is most conspicuous in the housing markets in booming times. Supply Shock is when there is a sudden drop in the supply of a commodity with an unchanged demand, like in case of oil prices.

People say ‘problems never come alone’. India was celebrating the Sensex touching 21k at the beginning of the year. Then suddenly the weather changed from sunny to cloudy to very cloudy and now it seems it is about to rain (if not pour). Elections are approaching, Gujjars are whirling their sticks around in Delhi, commodity prices and crude oil prices are rising. Now this is a really tough challenge for a government, which is interested in coming into power once again. Let’s keep fingers crossed for the best greater good and pray that our policymakers will see an opportunity in this problem instead of burying their heads in the sand like an ostrich to later blame each other and some invisible ghost. And everyone will be left wondering where the oil went.