Indian consumers are locked in a frustrating game with their oil consumption. No matter how much they moderate consumption, it never seems to impact prices. Oil prices have officially broken the demand-supply relationship.
Indonesia’s tourism industry is at an impasse over getting safety certificates. The government’s willing to issue them, but who’s going to bear the audit costs?
Education is a useful weapon of progress. But online schooling has had the opposite impact on school children from working class backgrounds.
Oil’s always on boil for Indians
When it rains, it pours. True for trouble too. Indians will have to brace for more pain on petrol and diesel prices that are now close to or have crossed the Rs 100 ($1.3) a litre mark. That’s because Brent, one of the key global crude oil benchmarks, breached the US$80 per barrel mark this week. Rising demand, supply shortages, and low inventory levels are to blame.
Goldman Sachs expects Brent to rise further to US$90 per barrel by the end of this year, upping its earlier forecast of US$80 per barrel. That’s bad news for India, which imports about 85% of its crude oil requirement. Oil on the boil adds to the country’s import bill, its current account deficit, and hurts its currency value. It fuels inflation too. Not great news for an economy that’s just recovering from the devastating waves of the pandemic. No wonder the stock market has turned jittery over the past couple of days.
Trying to predict the fickle fuel’s movement is a mug’s game. Nothing can be ruled out for a commodity that swung from US$115 to US$26 to US$80 a barrel between 2014 and 2018. In March-April 2020, Brent had crashed to below US$20 a barrel due to the Covid wave that squeezed demand and caused a massive oversupply of oil globally. The predictions then were that oil would stay subdued for quite some time. But yet again, it sprang a surprise, quadrupling over the past year and a half, aided by fast vaccine rollouts, economies opening up and the major suppliers—OPEC plus some non-OPEC countries—managing to keep supply under check.
The trouble for Indian consumers is that the centre and the states invariably make use of every sharp fall in oil prices to increase taxes on petrol and diesel. For instance, during oil’s rout between November 2014 and January 2016, excise duty on petrol and diesel was raised 9 times, totalling about Rs 12 to Rs 13.5 (~$0.17) a litre. Many states, too, upped their value-added tax (VAT). But when oil prices started rising between 2016 and 2018, taxes were not cut meaningfully. Heads I win, tails you lose, the governments seemed to say. Ergo: consumers bore the brunt.
The pattern has played out again over the past year and half. As we wrote in an earlier edition of BFO,
From less than US$50 a barrel in January this year, the Indian crude oil basket (a combination of Oman, Dubai and Brent oil) has risen to nearly $78 now. And if Goldman Sachs is to be believed, this will go up further. This combination of rising oil prices and high taxes could mean higher petrol and diesel prices in the coming days and weeks.
Damned if you certify, damned if you don’t
Indonesia—especially tourism-dependent regions like the island of Bali—is desperately waiting to re-open its borders.
But there’s a lot of anxiety about how to do this. The government needs to demonstrate that it’s doing its part in preventing tourism hotspots from becoming the source of new outbreaks. The tourism industry—hotels, restaurants, and guesthouses—don’t want that either. But they also just want to get on with it. They’ve lost too much money in the past year.
The nervousness is showing in a dispute the Indonesian Hotel and Restaurant Association (PHRI) is having with the Ministry of Tourism over a proposed health certification scheme.
The Cleanliness, Health, Safety, and Environment (CHSE) certification was introduced by Indonesia’s Ministry of Tourism last year, as a means to standardise Covid-19 safety protocols in the tourism sector.
For restaurants, for example, the requirements include special training for all staff, and following a detailed plan for sanitising surfaces, among many other procedures. To get the certificate, tourism players must fill out a self-assessment form and be prepared for a visit from an auditor.
CHSE was first introduced in 2020 as a voluntary scheme. According to the certification body’s website, some 8,000 certificates have been awarded so far. The catch is that now, the tourism ministry wants to make it mandatory—an extra precaution before borders reopen.
The PHRI is opposing this, fearing extra costs. So far, the government has footed the bill for audits, but it has already mentioned that it can’t keep doing this and is envisioning a scheme where larger tourism players pay for it by themselves. This would help the government recover costs so that it can continue to offer it for free to the smaller, MSMEs-type players in the tourism sector, who can’t afford the certificate.
Everyone’s resources are depleted: the tourism industry’s as well as the government’s. At the same time, a stringent Covid-19 prevention protocol that’s enforced and implemented widely could be a solution to reviving tourism. Damned if you mandate a certificate, damned if you don’t.
Education is a powerful weapon. But for who?
“Education is the most powerful weapon which you can use to change the world,” said the late Nelson Mandela.
Done well, no other intervention comes remotely close to the impact that schooling and education can have on ensuring a better future for children than the ones their parents had. But with countries the world over, and India especially, deprioritising schools as they dealt with Covid, a powerful weapon is being turned on its head.
If school was meant to empower children to break out of the divides that encircle their families, then online school might be doing exactly the opposite, argues a new report published in Nature.
Digital education, argue the authors, has ended up strengthening three types of divides faced by children from poorer families—digital, cultural and economic, and structural. It is a sobering report, which I’d urge you to read in full.
If you’re wondering how Indian school kids are faring, please read this Emergency report that was published this month.
That’s all for today folks! Tune in tomorrow for a brand new edition.