The World Needs An Alternative to Oil

By: Jyoti Pal

The rise in oil prices looks ominous. This is likely to stir up global inflation and create a challenge for policy makers to avoid a repeat of the 1970s' oil shocks,

The fall in oil prices in the last four days is likely to be temporary. The fall has been triggered as a cease-fire took hold in Lebanon and concerns eased about supply disruptions in the US state of Alaska. Moreover, investors responded to news that BP expects to maintain half of its production at a large oil field in Alaska despite a pipeline leak. Light sweet crude 10 cents to $72.95 a barrel.

Compare this to the prices 5 years ago, where once oil was traded at $12 per barrel. The rising scenario in the oil market is directly influenced by the Middle East crises, the growing demand of the industrial sector and the continuous hurdles faced by the refining companies. This week’s fall is expected to be an exception and analysts expect oil prices to reach the dreaded figure of $100 per barrel in a few years to come

Unfortunately, Asia’s two leading economic locomotives- China and India are fully dependent on the oil imports to keep their cars and industry on a run.

Though efforts are being made to broaden the use of alternative fuels, but these projects haven’t ascended the line of marginality yet.

To counter the rising oil prices countries have started looking for other means of energy. Countries like Brazil, China, India, and Thailand have started to produce ethanol from sugarcane that can be mixed with gasoline. These days transport countries are also focusing on alternative fuels like biodiesel, produced from rapeseed in EU, soybean in the US, and vegetable oils in Malaysia and the Philippines.

But whatever may be the developments, no other commodity has such versatile usage as petrochemicals. From tyres to medicine, from cell phone covers to plastic sheeting it does it all.

No wonder with the rising prices the world is being caught into a double trap. The oil consumers are being tightly gripped into the vicious circle. Where on one hand, if oil consumption is reduced, the pace of the economic growth slows down and on the other hand, if oil consumption is not reduced then it leads to inflation which in turn also slows down the economic growth as oil prices affect the price of nearly everything. A Catch 22 situation indeed.