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The increase in oil prices to a high of $146 per barrel in July 2008 and its subsequent decline to $112 on September 1 (Business Line, September 2) proves that the prices are decided by the bulls and bears of the oil market and not necessarily by the demand and supply of the commodity.

Traditionally, countries control, or try to control, the prices of commodities by controlling the taxes, import and export duties, by imposing bans and lifting them, and tweaking production and trade enabling factors. However what they are unable to factor in is the role of big money, over which no country has any control.

It moves from one commodity to another, and from one country to the other. It is this hot money that makes or mars the market. If countries can control money as a commodity, the abnormal changes in the prices of commodities will be fewer.

P. E. Muthu Mumbai

More Stories on : Letters | Petroleum

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