While U.S. President Trump and other U.S. economic commentators are waiting for oil prices to drop “like a rock,” etc. as soon as America and Iran “make a deal,” other analysis continue to project severe energy inflation out into the Summer and Fall; meanwhile, India has become the first major economy whole government has imposed rationing. In India’s case, it is rationing of commercial fuels, including diesel and ethanol, rather than of crude oil for refineries; and a ban on commercial entities buying gasoline at “consumer” stations. The gasoline price is being subsidized to prevent unrest among consumers, and commercial buyers are to be prevented from buying fuels at consumer stations.
There are daily limits for diesel and other commercial fuels. Commercial buyers will have to get their fuels from bulk sellers, to prevent gasoline stations from running dry each day as many have been. The limits will be in effect for 90 days.
India’s producer price, of “wholesale” inflation doubled from March to April, reaching 8.3%, and is forecast for 9% in May; retail inflation meanwhile has crossed 4%. Its currency has dropped fast against the dollar, and the Trump Administration has used this to try to block India from buying any Russian oil, or from accepting any Iranian assistance in leaving the Strait of Hormuz. Indian sailors have lost their lives to U.S. gunboats or aircraft in the process (see separate report).
London’s Economist ran a story June 11 saying that “the world’s strategic oil reserves are running out fast.” The article maintains that cuts to consumption which China was able to make to aid other nations, and which austerity imposed on other countries, have lowered global oil consumption by about 10 million bbl/day, while availability of produced oil has dropped by 15 million bbl/day. The 5 million bbl/day difference is slowly being drained out of strategic national reserves which were already low, such as those of Japan and the United States.
