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India can’t afford to keep slipping on oil crises

The US-Iran ceasefire may ease oil prices, but India’s history of oil shocks shows why a rapid shift to renewable energy is critical.

The whole world, India included, will have breathed easier following the announcement that the United States and Iran have come close to an initial agreement. Hopefully, that should extend the ceasefire and open the Strait of Hormuz for shipping. No details are available at the time of writing, and one cannot be certain that there won’t be more blips on the way to a deal–or deals, since a preliminary one is likely to need follow-up agreements with difficult details. So the release of tension is probably accompanied by people also holding their breath!

Sunday’s announcement should help to lower the prices of oil, gas and other critical commodities like urea. But even if a deal is actually reached, it will take months for the situation to return to the pre-war normal. Still, the world economy will have avoided the sharp slowdown that seemed a real prospect last week. India, hugely dependent on the imports of both oil and gas, as well as urea and other commodities produced in the Gulf area, will be particularly relieved.

The country has had a crisis-prone history associated with oil price shocks, one that is worth a brief recount in order to underline the need to avoid repeating that history. For, every oil price spurt so far has led to an economic crisis that in turn has provoked political change. This was true of the first oil shock of 1973 which quadrupled oil prices almost overnight, from $3 per barrel to $12. Inflation soared to 30 per cent, and the opposition was able to force Indira Gandhi on to the back foot. The chain........

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