International oil prices rose after Opec and its allies ignored India’s plea to ease production control, with Saudi Arabia asking New Delhi to instead use oil it bought at rock bottom rates last year.
India’s Oil Minister Dharmendra Pradhan had in the run-up to Thursday’s Opec meeting urged the producers’ group to ease production curbs to fulfil their promise of stable oil prices. He felt rising international oil prices were hurting economic recovery and demand.
Responding to a question on India’s pleas, Saudi energy minister Prince Abdulaziz bin Salman at a press conference after the Opec+ decision on Thursday said New Delhi should take some of the crude out of storage that they had purchased at very cheap rates last year.
“With regard to India, very simple. I would ask my friend that he withdraw some of the cheap oil that they bought in April, May and June (last year), the Saudi Minister said. “There is an opportunity cost for not withdrawing it now.” India had purchased 16.71 million barrels of crude in April-May, 2020 and filled all the three Strategic Petroleum Reserves created at Visakhapatnam in Andhra Pradesh and Mangalore and Padur in Karnataka. The average cost of that crude purchase was $19 per barrel, according to Pradhan's written reply to a question in the Rajya Sabha on September 21, 2020.
Retail petrol and diesel prices, which already are at historic highs, should rise if the oil companies decide to pass on the surge in international oil prices to consumers. Petrol and diesel prices have remained unchanged for the last five years and oil companies have in past not revised prices in the run to crucial assembly elections in 2017 and 2018 ahead of elections in states like Uttar Pradesh and Gujarat.
West Bengal, Tamil Nadu, Kerala, Pondicherry and Assam will go to the polls in the next few weeks.
Earlier this week, Pradhan had said India, where fuel demand is recovering to pre-pandemic levels, wants reasonable and responsible oil prices.
India, the world’s third-biggest oil importer and consumer, had supported the decision of Opec+ to cut production last year in view of the oil demand collapsing due to the spread of Covid-19.
“At that point in time, the producers especially Opec assured the global market, that by the beginning of the 2021 demand will be coming back and production will be as usual. But I am sorry to say the production is yet to be normal,” he said.
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