'Protecting home prices a priority'

Rising crude prices in the global markets will increase price of inputs and of export items.

The government today said it would look into ways to rationalise domestic prices of petroleum products to offset the adverse impact of high global crude prices.

"The government is fully seized of how to rationalise petroleum prices," Chief Economic Advisor Ashok Lahiri said at a conference on energy security here.

He added that the Rangarajan Committee on pricing of oil and oil products was looking at ways of rationalising the prices of petroleum products. But he declined to comment on whether the panel's recommendations would be incorporated in the next Budget.

Expressing concern over high crude prices, he said, "The rising crude prices in the global markets will affect us, as it will increase the price of inputs. Price of export items will also rise."

The reference price of Indian crude oil basket rose to $53.7 per barrel in April-September 2005 from $36.3 per barrel during the corresponding period last year.

Forward contract prices of global crude continued to be high, and refining margins of Indian oil companies were also high, Lahiri said.

Experts at the conference felt that high prices in crude were here to stay. The combined global energy demand was expected to grow at 2.1 per cent, with the demand for natural gas expected to grow most rapidly at 2.9 per cent over the next 20 years, Paul Bradley, senior oil analyst of Asia said.

He said in India, assuming an average GDP growth rate of 5.3 per cent during 2005-25, the energy consumption was expected to rise by 4 per cent. This meant dramatic increase in the import of energy commodities and much more investment on energy infrastructure, Bradley said.

Growing demand is met by constrained supply which has resulted in spiralling prices. Among the non-OPEC countries, Russia was one of the promising sources, but Professor Paul Stevens at the Centre for Energy Petroleum and Mineral Law and Policy in the University of Dundee, Scotland expressed his doubts about the promises materialising.

He said there was uncertainty over Russian political stability and fiscal system. "At the start of 2006, the non-OPEC growth was pegged at 1.4 million barrels per day, of which only 0.1 million barrels per day were produced," Stevens said.