PremiumIndia has been pressing the Opec to balance the interests of crude suppliers and consumers for long. It is expected to discuss oil prices with Opec secretary general Mohammad Sanusi Barkindo who is now in Delhi.
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India has been pressing the Organisation of the Petroleum Exporting Countries (Opec) to balance the interests of crude suppliers and consumers for long. It is expected to discuss oil prices with Opec secretary general Mohammad Sanusi Barkindo who is now in Delhi.
Why are low oil prices crucial for India?
India has been requesting the Opec+ that also includes Russia to raise production to soothe global energy markets, and has pointed out that a high price regime will kill the nascent economic recovery and the demand for energy. India has also raised the issue with major oil-producing nations such as Saudi Arabia, Kuwait, Qatar, United Arab Emirates, Bahrain, US, and Russia. India is dependent on imports to meet 85% of its oil demand and 55% of its natural gas requirements. It is also the world’s third largest oil importer. Opec accounts for the majority of India’s crude oil imports and around 40% of global production.
How has been Opec’s response?
India’s repeated requests have been rebuffed by the oil cartel, which has decided to keep supplies just below demand to sustain high oil prices. With India’s consumption around 15–16% higher than the pre-covid levels, there aren’t many options to temper fuel prices. India is particularly at a disadvantage as any increase in global prices can affect its import bill, stoke inflation and increase its trade deficit. Petrol and diesel were selling at a record high of ₹106.19 and ₹94.92 per litre, respectively, in Delhi on Wednesday, while Brent was trading at $84.53 a barrel and West Texas Intermediate at $82.26 a barrel at the time of filing of this story.
What else does India seek from Opec?
India has requested a reduction in official selling price, extension of credit period from existing 30 days to 90 days from bill of lading, freight discount, and open credit based on credit worthiness of Indian state-run refineries. It has also sought a price and terms correction on the so-called Asian premium, a burden on nations dependent on West Asia to meet their energy needs.
How is India dealing with the high prices?
As the prices remain high, India has begun selling crude oil from its strategic petroleum reserves to state-run refiners. The plan is to replenish them when prices are comparatively lower. The storage capacity is, however, limited at 5.3 million tonne (mt), enough to support only around nine and a half days of India’s oil requirements. The government in June 2018 also approved the construction of an additional 6.5 mt of strategic crude oil reserves to support 12 days of crude oil requirements. Indian refiners also store crude oil.
What long-term steps can India take?
Apart from staying the green energy course, India will also have to raise the domestic oil & gas production to successfully manage its energy transition. While India’s domestic oil production continues to falter, there has been an uptick in gas production. Any rise in domestic production will help cut imports and save valuable foreign exchange. India does have some leverage given the quantum of oil it buys. Even acquiring overseas assets has not worked very well for India, given the countries where these assets are located are part of Opec+
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