EDITORIAL : THE HINDU, INDIA

Opec dynamics and India

Microeconomic theory has long predicted the demise of the Organisation of Petroleum Exporting Countries, the 12-nation cartel that attempts to regulate the output of its members in the hope of meeting a higher target price than would otherwise prevail if each produced as much as it wanted. Economists say cartels are inherently unstable because their members have a tendency to “chisel,” increasing output by a little to make windfall revenue gains at the artificially high price. As each country chisels, hoping it is the only one, the market is flooded with extra supply and the cartel ends up collapsing. However, since its founding in 1960, Opec has always managed to confound the textbooks. This is because oil is not any old widget or commodity. It is the world's most important source of tradable energy. That is why politics and geopolitics drive global oil markets as much as crude economics. At its most recent meeting in Vienna, Opec's largest member, Saudi Arabia, in tandem with “price doves” Kuwait, the UAE, and Qatar asked for an expansion of global oil supplies so that the rise in oil prices caused by the western war against Libya could be moderated. This push was resisted by Iran, Iraq, Venezuela, and others. Defeated, the Saudis later said this was Opec's worst meeting ever.

In the textbook case, a cartel can survive if the largest member cuts back its own output to accommodate the increased sales of the chiselers. But in the real world, where “unreasonably high” oil prices end up making alternative energy sources more attractive, the largest member has to increase its output if it wants to save the club. This is precisely what Saudi Arabia has done. By announcing a 10-million-barrel-a-day increase in output, Riyadh has managed to rein in the benchmark Brent price, which was headed towards $125 a barrel. But Saudi benevolence has its limits, especially given the popular ferment now under way in West Asia and North Africa. If oil prices fall by too much, that may undermine the ability of the sheikhs to buy peace with their restive subjects. For India, the dynamics inside Opec are at best a sideshow. Its own quest for energy security must continue with equal priority to pushing the three Es: Exploration of oil and gas at home, the purchase of Equity oil abroad, and maximum Efficiency in domestic consumption. The Libya war is also a reminder of the need to speed up the creation of our own strategic petroleum reserve to tide over short-term market disruptions. In addition, India can learn a lesson or two from countries that pursue a more independent course than it does in international relations so that they can maximise their strengths and special advantages.

Silencing the media

Jyotirmoy Dey, Editor, Special Investigation, Mid-Day, was not the first journalist to be shot dead this year in India. Umesh Rajput from the Hindi daily, Nai Duniya, was killed near Raipur in Chhattisgarh on January 23, and earlier on December 20, 2010 Sushil Pathak of Dainik Bhaskar in Bilaspur. In 2011 alone, there have been 14 instances of attacks on journalists according to a report from ‘The Free Speech Hub' of thehoot.org. On May 19, Dey's colleague Tarakant Dwivedi was arrested under the Official Secrets Act by the Government Railway Police (GRP) for an article written over a year ago in another newspaper on the poor storage conditions of hi-tech weapons bought after the 26/11 attack. However, the gunning down of Dey in broad daylight by four unidentified men has rattled a media inured to gangland killings. The police believe it was ‘the work of professionals,' presumably hired guns connected to the underworld. But the big question is who was behind the killing and so far no one has been arrested. Journalists and media-houses have been attacked with impunity and since the 1990s cases have dragged on forever without any convictions. Coming to Mr. Dwivedi's aid after his arrest, Dey had met Maharashtra Home Minister R.R. Patil and called attention to a rather sensitive Anti Corruption Bureau (ACB) report on the mafia-police nexus. The incident underscores the need for some kind of special protection for journalists covering the mafia and conducting investigations on their own. Dey had reported on diesel adulteration in a big way and on alleged links between the mafia and the police.

The Maharashtra government has been promising a law that makes attacks on journalists a non-bailable offence. That may not be the solution. It is crucial to implement existing laws and make sure the guilty are punished. Dey was no stranger to threats and took them head on. His death last Saturday comes soon after a gruesome murder of four men, turning the spotlight back on the pathetic law enforcement in Mumbai. The underworld in the city now is complemented by a powerful builders' lobby, which allegedly has a measure of political and official patronage. Dey's murder can have a chilling effect on the media and to ensure that journalists truly have space and freedom of expression, the government needs to be much more attentive to crime, the factors behind it, and its links, if any, with sections of the official establishment. The state should conduct a transparent and speedy investigation into Dey's murder and, belying its dismal track record, demonstrate that at least now it means business.