One day someone should write an academic case study on petroleum products pricing. The objective should not be to detail the technicalities of the subject. That would be of interest only to the aficionados of the petroleum industry. The purpose should be to throw light on the ability of a multiparty, federal and bureaucratically inflexible government to meet the ever-changing demands of our young, aspirational society. It should be to use the peg of the twists and turns of policy in petroleum pricing to better understand the dynamics of decision making; the new structures and systems that are required to navigate the ambiguities of coalition politics and the role of professionals in the corridors of authority. Ultimately, it should be to help define the appropriate balance between the market and the state in a connected, global world and to narrow the gap between statesmanship and populism.

The subject of petroleum pricing provides a solid peg for three reasons. One, it is a subject on which there is no ideological debate. It does not excite the sort of divergent positions that the financial crisis has triggered in the West. The UK government, for instance, has just produced a Budget that imposes swingeing public sector expenditure cutbacks and higher taxes. The Chancellor?s position is that fiscal austerity is the most effective means of returning the UK economy to the path of sustainable growth. The US administration, on the other hand, does not believe the time is right to dilute the stimulus that was injected in 2009 and pulled the US economy back from the edge of financial collapse. There is no such substantive difference over petroleum pricing. All political parties accept that as India imports 70% of its crude oil, it has to move domestic prices in line with international trends. It was the NDA government that gazetted a Cabinet decision to dismantle the APM in April 2002. And it is the current governing coalition that took a similar decision last week. Thus, the twists and turns of policy have not to do with ideology but with raw ?tit for tat? politics. A fly on the walls of the offices in which this subject has been discussed would have a wealth of information on the compromises, unpredictabilities and fuzzy logic that define discussions based on political self-interest and personal perceptions rather than objective reality. It could provide insight into the determinants of the boundaries between good economics and good politics.

The second reason is, in a sense, an elaboration of the first. Petroleum pricing is a subject on which the professionals have also spoken with one voice. Other than perhaps the most hardened of Left wing ideologues, every economist has agreed that the cost of administrative regulation far outweighs any conceivable economic benefit. Four major studies led by individuals of considerable renown?Vijay Kelkar, C Rangarajan, BK Chaturvedi and Kirit Parikh?have separately urged price deregulation. Their recommendations have not been rejected but nor have they been fully implemented. Thus, there is a grey area in governance between the form of soliciting professional counsel and the contents of the eventual decision. This is an area that the study could better define. No one should expect governments to define policies in unambiguous whites and blacks. The world is too complex for such clarity.

But by examining the degree to which the advice of professionals determines the shading, one could offer further insight into the strains of Cabinet (or should I say EGoM) government in a coalition.

The third reason flows from the international dimension of petroleum pricing. With the benefit of hindsight, it is clear the government missed an opportunity to deregulate in February 2009 when international prices were below $50/bbl. Today they are hovering around $70/bbl. Why did they not deregulate? Was it only because of the forthcoming general elections? Or did they expect that prices might fall even further? Whatever the reason, the case study might help better appreciate the extent to which international issues get factored into the formulation of public policy.

The 2007-08 crisis offers many lessons?not least of which has to be the cliched refrain ?there is no free lunch?. Whatever the reason?greed, regulatory incompetence, corruption, the weakening underpinnings of markets; the unintended consequence of technological overreach?there is no escaping one fundamental truth. Economies across the western world are reeling because for years they spent more than they earned. The questions that this crisis has posed is, how did the governments ignore the early warning signals of impending collapse? What was it in their system of governance that allowed leaders to continue down the path of market fundamentalism, when at least with the benefit of hindsight it was clear the signposts had shifted direction and as Alan Greenspan admitted to Congress in August 2009, the system of self interest (i.e., private companies promoting the public good) was ?flawed?? We did not face the financial traumas of the West but these questions should not be ignored. For the saga of petroleum pricing does reveal the pressures in our system towards financial profligacy. A case study could help answer these questions and possibly suggest safeguards against the deeper pitfalls of coalition politics.

?The author is chairman of the Shell Group in India. These are his personal views