Wednesday, February 15, 2012

Oil story

Last few days oil crisis has been biting all of us really hard. Monday when I stepped out to go to work I couldn't find a bus so had to find a three wheeler to get to office. Then the next day, when I gave 20 Rs for my journey from Bambalapitiya to Galle face the conductor said that's the revised price. I had no clue about the price revision so I assumed that it was right, then I found out that I had been cheated a few rupees.

Then today I see that the Rupee has hit an all time low and the power surcharge is going to be in the range of 15 to 40%. Apparently the stock market has been on a 'joy' ride all the way downhill. Sri Lankan economists had been crying that Sri Lanka is facing the balance of payment crisis. Now people wouldn't remember the famous 'plug' which JVP managed to to remove back then and after 8 years the removed plug is hurting us badly. They threw the formula out and now we see the credit pressure the prices are being increased in leaps. In 2009 IMF bailed us out, this time we need someone else to bail us out.

Funnily two weeks back Khajeel times carried this story, and after reading this I posted the blog Now I seriously think that the middle eastern media knew more than we knew, about the crisis we are about to face. Imagine another price revision if the sanctions too decide to bite us. Interesting times.

1 comment:

  1. The problem is not really oil. The sanction hurt because we get long CREDIT from Iran. It is the credit (or loans) that are the problem, not the oil.

    The Government spends more than it earns and fills the gap by borrowing. The interest then adds up with the rest of the spending and makes the hole bigger. They borrow again and the cycle gets bigger each time and the hole deeper.

    When they finally find that they have to repay it all the burden is passed to the consumer - as higher prices.

    This, in a nutshell, is the problem here. It was the same problem the Greeks face today, only their Government managed to borrow a great deal more (because everyone assumed that Germany would bail out any Euro country) so their hole is vast-and the price the citizens pay equally so.

    We are however, striving hard to get to where the Greeks are, with a little help from our Chinese friends.