Ask any toddler these days about oil prices, and chances are quite good that he may reply back - 'They're rising!' One may thus be tempted to think that this is a lucrative business now, with lots of money pooling in.
But just consider this - I happened to read today in the news that the Indian Government has decided to bill ONGC in Indian rupees now onwards. What was happening was that ONGC was running into problems considering the recent growth in strength of the Indian rupee compared to the US dollar on account of increasing foreign investments in India. Now ONGC was selling its oil in dollars, but earning in rupees, which was causing it some serious problems. Well, actually what happens is that we buy that oil at a price that is capped by the government, to reduce damages to the oil marketing companies on account of the volatile oil prices. Companies like ONGC partly compensate these damages.
Now what happens is that ONGC will be billed in Indian rupees too, so as to make up for the losses they were facing. But it still isn't champagne time for the company yet - since they will now be priced in rupees, they are now owned by the government, and have to pay a subsidy as a consequence, which greatly reduces their profit margin. I just feel sad for them.
Seems pretty complicated, doesn't it?
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