Atanu Dey On India's Development

Clueless Mail Forwards

Junk mail is a part of (modern) life as much as death and taxes. I imagine there is a special circle in world.wide.hell where those who forward idiotic emails end up in. Here is one that infected my mailbox, screaming capital letters, misspelling, and all.

Dear Friends !

Petrol in Pakistan Rs 17 per litr [1]
Malaysia Rs 18 per litr
In India it’s 48 per litr

Why this difference in Asia itself? World Market CRUDE Oil is not the reason for this. It’s all Gain for private owners? As we are the general public, or Common Man as R.K.Laxman wud hv said, we have to raise our voice, let’s raise thru Emails.

Forward this to all Indians who care.

IT HAS BEEN CALCULATED THAT IF EVERYONE DID NOT PURCHASE A DROP OF PETROL FOR ONE DAY AND ALL AT THE SAME TIME, THE OIL COMPANIES WOULD CHOKE ON THEIR STOCKPILES.

AT THE SAME TIME IT WOULD HIT THE ENTIRE INDUSTRY WITH A NET LOSS OVER 4.6 BILLION DOLLARS WHICH AFFECTS THE BOTTOM LINES OF THE OIL COMPANIES. THEREFORE “THURSDAY SEPTEMBER 22nd ” HAS BEEN FORMALLY DECLARED “STICK IT UP THEIR BEHIND ” DAY AND THE PEOPLE OF THIS NATION SHOULD NOT BUY A SINGLE DROP OF PETROL THAT DAY.

THE ONLY WAY THIS CAN BE DONE IS IF YOU FORWARD THIS E-MAIL TO AS MANY PEOPLE AS YOU CAN AND AS QUICKLY AS YOU CAN TO GET THE WORD OUT. WAITING ON THE GOVERNMENT TO STEP IN AND CONTROL THE PRICES IS NOT GOING TO HAPPEN. WHAT HAPPENED TO THE REDUCTION AND CONTROL IN PRICES THAT THE ARAB NATIONS PROMISED TWO WEEKS AGO?

REMEMBER ONE THING, NOT ONLY IS THE PRICE OF PETROL GOING UP BUT AT THE SAME TIME AIRLINES ARE FORCED TO RAISE THEIR PRICES, TRUCKING COMPANIES ARE FORCED TO RAISE THEIR PRICES WHICH AFFECTS PRICES ON EVERYTHING THAT IS SHIPPED. THINGS LIKE FOOD, CLOTHING, BUILDING SUPPLIES MEDICAL SUPPLIES ETC. WHO PAYS IN THE END? WE DO!

WE CAN MAKE A DIFFERENCE. IF THEY DON’T GET THE MESSAGE AFTER ONE DAY, WE WILL DO IT AGAIN AND AGAIN. SO DO YOUR PART AND SPREAD THE WORD. FORWARD THIS EMAIL TO EVERYONE YOU KNOW. MARK YOUR CALENDARS AND MAKE SEPTEMBER 22nd A DAY THAT THE CITIZENS SAY “ENOUGH IS ENOUGH”

We forward so many junk email to many of our friends, now let us do it for some useful cause to cut down the price of the petrol .. …

REMEMBER : SEPTEMBER 22nd 2006

Can people really be so clueless as to claim that one day of not buying petrol will make any difference at all to anybody?

Think about it for a bit: gasoline is not a perishable good. In fact it can keep more than a day, considering that it has kept for umpteen millions of years in the ground. We do not buy petrol everyday because cars have petrol storage capacity exceeding a few days’ needs. If I know for some reason that tomorrow I will not be able to buy petrol, then I will either buy it today if I am running low, or buy it sometime after tomorrow when I have to.

By declaring “no petrol buying day” on a particular day, one merely shifts the buying of the petrol — it does not reduce the demand overall. All it does is that on that day if everyone is committed to not buying petrol, the petrol pump owners can shut down their pumps without loss of business and take a holiday. They will have to work a little bit harder on the other days to compensate for their holiday, of course, but they will not lose money. Nor will the petrol companies lose any sleep.

Bottom line: even if one were to shout out loud and use ALL CAPITALS in the message, the idea is still born and ridiculous.

Aside from the sheer idiocy of the idea, the letter betrays a far more insidious ignorance: the ignorance of what prices mean in general, and more specifically who controls the price of gasoline. Crude oil prices are a combination of production (current and forecast) and demand (current and forecast.) Whatever be the cost of extraction, crude prices signal the relative abundance of supply relative to demand. To a large extent, the global supply of crude is controlled by the few members of the OPEC. They have market power and if they restrict production, all things being equal, the price goes up. Alternatively, if the demand goes up and the supply remains the same, the price also goes up. This is not rocket science. The price of crude at the well-head differs from the price of refined gas at the pump. You have to add the cost of transportation, refining, and local taxes. In many cases, local taxes account for a significant share of the price of gas at the pump. The only control that the government of an oil importing economy has is in the tax component of the price.

So the question arises: should the government of India tax gasoline to the extent it does or should it reduce taxes? It is not a trivial question. Lower taxes would mean greater consumption, which implies a higher gasoline import bill. India has to match its imports with its exports, roughly. The budget constraint is pretty severe in India’s case, as opposed to say the US.

The other consideration is that tax revenues from gasoline purchase amounts for a significant source of general revenues for the government. Can India afford to forego this revenue source? Again, not a trivial question.

Global crude prices have gone up. That must be reflected in the price that one pays at the pump and this change in price should signal to the consumers to reduce the quantity they consume. The quantity consumed does not change through a self-imposed moratorium on buying for a day (or even many days) but through not using as much gasoline as before. This commonsensical notion is entirely lost on those who have brilliantly come up with the silly chain letter.

Pass this message on to every Indian you can. Please.

NOTES: [1] Don’t know for sure how much gas costs in Pakistan. Rs 17 seems low to me.

  • http://www.lifeandsomething.blogspot.com Gaurav

    Atanu,

    Two questions,

    “Lower taxes would mean greater consumption, which implies a higher gasoline import bill”

    Shouldn’t we leave this to mechanisms of free market ?

    “The other consideration is that tax revenues from gasoline purchase amounts for a significant source of general revenues for the government. Can India afford to forego this revenue source? Again, not a trivial question.”

    Shouldn’t the question arise that why does Government require that much amount.
    I mean shouldn’t the emphasis on trimming bloated babucracy.

    Regards

  • Anuradha

    Hi,

    You are right that prices of petrol in pakistan aren’t that low. It is approx. 44/ltr. Check out
    http://www.kshitij.com/research/petrol.shtml

    ~Anuradha

  • Praveen

    I have been trying to understand how petrol prices in India are fixed but haven’t gotten far. Even though the administered price mechanism is supposed to have been disbanded, I don’t think it has been junked yet. We mostly import crude and refine it ourselves (?). Shouldn’t this make fuel cheaper for us ? When fuel companies talk of losses they are actually referring to under-recoveries as compared to international prices. Then there is the exchange rate from dollar to rupee, with some people of the opinion that the rupee is higly undervalued.

    With the sorry state of public transport, most people are left with no option but to use personal vehicles. Bad traffic flow not only leads to wastage of fuel but also results in stress and pollution. The other big user of fuel is goods transport by lorries. Even though we have an extensive rail network and coal reserves, the railways have not carried much goods due to high freight charges (to subsidise travellers) and poor management.

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  • vishal telang

    Please have a survay of companies market stability, which would help the people to think about the exact loss to the companies. so that this news will spread fast.

  • kINGSHUK BASU ROY

    Respected sir

    I have drawn a car picture manually with the help of my computer.for last couple of years I tried to send the picture to ur website but i could not find it properly.I live in India n I am a ordinary person who love cars.I am not so rich like any other person.I want to do something in my life.I have couple of car picture which can blast the car industry.

    So Sir,If u kindly give me any suggesition that where i have to send this pictures then I shall be very thankfull to u.

    Kingshuk Basu Roy