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How to survive the oil shock

June 10, 2008

If every man is entitled to his two minutes of fame, then T R Raymond has just had his.

This farmer from McMinnville, Tennessee, United States, came to the limelight recently when the media reported his unusual response to shooting oil prices. Raymond is now hitching his farm equipment to two mules Dolly and Molly instead of his tractor after oil became unaffordable for him.

The mules were bought last year and have been trained for their farming duties. To some, Raymond's move would be amusing but for others it would be proof of how hopelessly dependent on petroleum our everyday life is. An overwhelmingly large part of products and services need petroleum or petro-products in some form or the other.

This is the reason that rising oil prices mean higher prices of virtually everything and impact our money in ways we can't even think of.

At the time of going to the press, oil prices are at $126 to a barrel, more than double the April 2007 price of $63 a barrel. The future doesn't look too bright with prophets of doom predicting still higher prices.

International financial powerhouse Goldman Sachs, in its report dated 5 May 2008, said that oil could reach $150-200 per barrel in the next six months to two years. Of course, there are other international experts who feel that this oil price surge is an aberration and the prices will come down in the next one year or so.

In India, we are yet to feel the real impact of the flaring international oil prices even though over 70 per cent of the country's requirements are met through imported oil.

The oil prices in India are government controlled and, so far, the government has kept prices at levels that should have existed had the oil price been at $70, $30 and $25 a barrel for auto fuels, LPG and kerosene, respectively.

High oil prices are here to stay and would require all of us to adapt our personal finances. But before we tell you how to cope up, you need to know why the oil prices have risen so sharply and how this oil shock is different from the previous ones.

Text: Rajesh Kumar

Image: Motorists wait in a queue to get petrol and diesel at a filling station in New Delhi | Photograph: Prakash Singh/AFP/Getty Images

Also read: Petrol: The costliest and cheapest nations

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