Wednesday, June 4, 2008

“Nitwitted ninepins” – ( Captain Haddock in Tintin& the Land of Black Gold)

Billions of blue blistering barnacles, they finally did it.

In my earlier post I had written on the worry variable associated with oil. The markets have moved substantially lower since then.

The government finally developed a spine and did the right thing in my opinion. The move from the government will ease the pressure on the oil marketing companies and the associated fiscal deficit build up. More importantly passing down the costs will result in greater energy efficiency in the economy and will hopefully contract demand.

I think this move could have a interesting fallout. It could actually lead oil prices lower. With demand contracting across the world in economies that are passing on the cost of oil, India and China were the last major bastions where subsidised oil was fuelling demand. China I suspect wont move till the Olympics are through but India’s move might trigger a move down in oil which is increasingly getting bracketed as a bubble.

We of course have to wait and watch.

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