min-myinnersoul

The law is an ass. Governments are a bigger ass. Ramamritham is the chief ass. But even by those standards this takes the cake. Those familiar with India knows that this poor country indulges in wasteful expenditure of the worst sort. Free colour TVs, grinders, etc have made the news. But the criminal, inexcusable and worst sort of government waste is the subsidy on Liquefied Petroleum Gas (LPG). If there was a word stronger than criminal, I would use it. LPG  is supplied to all and sundry at a subsidy. It is sold at roughly half the cost - the government is supposed to pay the balance half to the oil companies , but it does so as and when it feels like it, or not at all. It is actually quite difficult to estimate how much the total subsidy is as the government hides this in different pockets but my estimate is that this monstrosity costs us some Rs 30,000 crores. The really poor don't use any cooking fuel at all - maybe firewood. The poor use kerosene. Only the relatively rich use...

There is economic cataclysm going on in Iran. What guns and rhetoric have failed to do might be achieved by grubby old economics - the downfall of the nut cases who have been ruling Iran for sometime. The Iranian rial has plunged into free fall. It declined by 25% in one week in October against the US dollar. Since the beginning of 2011 it has fallen by 70+%. It was some 10,000 rial to the US $ in 2011. Its now around 30,000 rials to the US $. The rial is now virtually worthless. Inflation by official estimates is some 25%, in reality more like 70%. There is economic chaos. Why is this important ? You only have to look towards  the street protests that have sprung up in Iran to see how this is affecting everybody in Iran - the rich, the poor, and yes, even the mullahs. But, wait a minute. Iran is oil rich, right ? It should be rolling around in wealth. And yet, the country  is in deep crisis and the population is suffering.  Why ? If ever there was an example of how a rot...

I don't know what to make of this story. An economics soap opera ? How the most unexpected things can happen  ? How sometimes prosperity can hit you from the strangest of directions ? Read on - judge for yourself. The story starts in a very boring manner. Everybody knows Americans guzzle gas. With the Sheikhs turning the screws, Americans are feeling the pinch. Ouch - the price of oil is hurting. Drill baby drill , is fine, but oil is, alas, not to be found. Need new forms of cheap energy so that Americans can continue to guzzle away. Suddenly they discovered a new "source" - Shale gas .  Apparently natural gas is  found in rocks called shales. And apparently shale gas is rather plentiful in the US. Wonder of wonders, use of shale gas even releases lower greenhouse gases than evil Oil.. Voila, the new gold rush is on.  All very good. What's new. This sort of thing happens all the time. The real interesting bit is that, in order to extract this gas, you have to do ...

Its time to change Andrew Lloyd Webber's famous song in Evita . There's no option, but to cry for Argentina. How else can you react to the awful move by Cristina Fernandez, Argentina's President, to nationalise YPF, two weeks ago ? YPF, Argentina's largest oil and gas company is 57% owned by Repsol, the Spanish oil giant. Ms Fernandez's grouse against Repsol is that it is not investing in increasing production in YPF. This is partly true, but the real reason why YPF is not expanding production is that her government has artificially kept petroleum product prices low . No company is going to invest for very little profit. So the good lady has decided to nationalise the company. No doubt, a pittance would be paid to Repsol, well below the market value of its shares in YPF. This is daylight robbery, of the kind Ramamritham (of Vodafone fame) would feel proud. Is this any way to treat your largest foreign investor ? Spain and the EU are up in arms and threatening a figh...

There is endemic corruption that beggars belief. There is a highly educated, superb English speaking elite and large masses of illiterate poor. There is insurgency and terrorism around the edges. There is organised loot of the country's finances with a few getting extremely rich and the lot remaining dirt poor. Misguided subsidies are ruining the state finances. There is a thriving film industry that churns our the second largest number of movies in the world and provides opium to the masses. No this is not India. Welcome to Nigeria. Nigeria is an oil producing country. You would expect that to be a huge blessing, right ? Wrong. It has proved to be a curse. Nigeria is suffering from an unsustainable petroleum subsidy burden. So unsustainable that this week it announced abolition of the subsidy. Predictably there will be chaos on the streets as large scale protests have commenced. The petroleum subsidy case in Nigeria is a textbook case of how pathetic government policies can ruin a...

Dear Madam, We are concerned about the state of your vocal chords, after your recent exertions of that organ protesting against the nth rise in the price of petrol that the Indian government announced a few days ago. While we are well aware of your superhuman powers in that sphere of activity, I am nevertheless concerned enough to give you some advice on the amelioration of  stress on your voice box. I am not one of your subjects, not living in your state at the moment, but have lived there in the past and therefore have a certain affinity. What has aroused your ire is the increase in price of petrol by Rs 1.80 per litre a few days ago. You have accused the Central government of total insensitivity to the plight of the common man and have threatened to withdraw your support to the government. With inflation running so high in India, you are justly concerned with adding fuel to the fire, if you'll pardon the pun.I totally agree with your sentiments, but my ire is not necessarily dir...

Yesterday was a theatre that has now become a regular feature of US political life. A self righteous and pompous Committee of the US House or Senate “summons” a CEO of some company and harangues him. Political windbags fall over themselves to misbehave with a foreign national. Yesterday was the turn of BP’s CEO Tony Hayward. It got so bad, that one of the Representatives in the Committee, Joe Barton, actually apologised to Hayward and then the howls from the lynch mob made him recant the apology. The White House and the US Senate and Congress has forced BP to fund a $20 bn escrow account for “damages” with regard to the oil spill and for it to be administered by an “independent” third party and pay out claims. What they have essentially done is to ask BP to write a blank cheque. BP has no choice really; and it duly has written a blank cheque. Make no mistake. BP is at fault. For taking safety too lightly. For not having a backup plan at all – in the companies I have worked in, you get ...

Oil on the boil again, screams the headlines in India’s Economic Times. Or as our wonderful little friend Chotu might say, Obil Boil . I am certain that his words were prescient and not just a child’s lisp of mama’s olive oil. Crude oil prices have touched $80 a barrel. The US dollar has continued to weaken and since oil prices are globally stated in US dollars, they are bound to rise further. I argued that the world must get ready for expensive energy for the foreseeable future here , but governments have lost a golden opportunity, when oil prices were low consequent to the recession, to prepare their citizens for the coming times when oil prices will be in 3 digits. This has profound implications for the whole world. Firstly inflation will inexorably rise. The risk of inflation in the near term is the highest, with two huge factors contributing to it – the price of oil and the stimulus money that governments have spent. When oil prices rose last time to the peak of $147 , we had rio...

The price of crude oil has climbed steadily to $70 a barrel. Its of course, way off, from the peak of $147 it touched in July ’08. But its been climbing steadily over the last couple of months. Two major events await us in the near future. The first is inflation. Its already a big risk because of the massive amounts of money governments, the world over, have been pumping in to ward off the recession. When oil prices shoot again, everything is going to be affected. Inflation will hit the poor most – the price of food will rise. Many governments will be tempted to subsidise the price of oil and public finances will become a further mess than they are, in most countries. Inflation is going to be a killer ; unfortunately there’s not much that we can do. Governments should have been acting through last year. When the price of crude oil fell to just above $30, they should have been creating a fund to cushion the inevitable rise that was to come. Nobody did this. Governments who control th...