Wednesday, October 3, 2018

CRUDE & ELECTION GLOBAL PATTERN


Soaring crude prices stands out to be an opportunity for the election campaign for every country where elections are about to be held. Rising crude disrupts stable government and creates a losing stance for them. Historically and even in the present, it is being found that the crude process plays a huge role behind the political party and particularly favoring the opposition party to win. Reduction of taxes and other levies on crude oil are the most promises to attract votes. Well, when crude goes up the inflation automatically shoots up which impacts every corner of the society. 

 The winning government remains under the perception that its economic development will supersede their policies regarding crude taxes. These blind thoughts have to lead to loss of position.  The common citizen of every country wants little savings to grow and a decent consumption where one does not have to cut down on expanses which lead to cut down on living standard. When this simple desire comes under risk then obviously the society will rebel and would look forward for an alternative person who will hear them out and will give them relief even if it is for the short term. It’s a human behavior which cannot be changed under any ages.

If we look around the world we will get an idea about how the crude is being a determining factor for winning the election. In Mexico, it contributed to the political rebirth of Andres Manuel Lopez Obrador, who won the July 1 presidential election on the back of a promise to hold fuel prices in real terms for three years by building more refineries and increasing subsidies. In Brazil the political rise of far-right populist Jair Bolsonaro, who could be within sight of the country’s presidency in the upcoming election. Further in  Indonesia, whose President Joko Widodo abolished gasoline subsidies after coming to office in 2014 might have to get back on the reverse course as he is heads toward next year’s polls. These change over speaks that crude is an very sensitive issue for every country irrespective of its financial condition.

Well taking a short term hit at the economic factors like CAD and Fiscal deficit sounds to be prudent where trillions of funds are being bailed out as shadow loans and shadow banking. In one route you let smart corporate to play with public funds and on the other part, you squeeze the  same people for filling up the government kitty through taxes on rising crude. When crude prices some leeway should be given so that the common people particularly the one son the verge of growing consumption are not affected. Rising crude creates global Inflation to grow which leads to interest rates to go up to control the inflation demon. This control process leads to impact gross fixed assets and also a slowdown in the expansion of industries and business impacting the same society.

Crude can lead to a massive fall out for the current government who is set to go for election in early 2019.  When the society suffers with high inflation then frustration within the economy builds up which gets reflected through election polls. Many economies took many steps to restore back the leeway’s given after winning the elections just to manage their fiscal condition. In the last couple of years many economies who imported crude were able to reduce their fiscal deficit and CAD but with changing times one has to look into balancing the economic growth.

 If we look the at the global subsidy given by various economies its being found that  the figure stood at $105 billion of oil subsidies  were given in 2016, according to the International Energy Agency . This figure is going to increase significantly in the coming days as crude is climbing new heights.   India is currently under the stable economic condition and hence it needs support from the government to reduce the taxes so as to pass on the benefits to the same to the end user. Farm output will turn out to be expensive keeping the current taxes on crude prices.


Now, these subsidies are criticized, since they are given as freebie well, when the tax payer funds are being bailed out through forged and shadow banking where does the value model stands at that point of the place. This argument will continue but as I said earlier that a common citizen wants the  savings to grow and his social consumption to remain same irrespective of any event. He demands protection in exchange of the vote one has given.

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