India asks OPEC to restore oil supply to calm inflation
In a consultation meeting with Mohammed Sanusi Barkindo, OPEC secretary general, Union minister Dharmendra Pradhan flagged concerns over the increasing crude oil prices and its impact on consumers.
Union petroleum minister Dharmendra Pradhan on Thursday asked oil producers’ cartel -- Organisation of the Petroleum Exporting Countries (OPEC) -- for restoring output to bring down international crude oil prices to a reasonable band, adding that their strategy of production squeeze is stoking inflation and restricting economic recovery of energy importers such as India.
In a consultation meeting with Mohammed Sanusi Barkindo, OPEC secretary general, Pradhan flagged concerns over the increasing crude oil prices and its impact on consumers and emphasised that high crude prices were adding significant inflationary pressure on India, a petroleum ministry spokesperson said.
India has been witnessing unprecedented jump in pump prices of petrol and diesel as auto fuel rates, which are linked to their respective international benchmarks, are moving northward unabated in the last 52 days. Due to a spike in international oil rates, petrol and diesel have become costlier by ₹7.36 and ₹7.57 per litre, respectively, since May 4.
Prices of the two fuels are breaking their own record almost every day as petrol breached the ₹100 mark in various cities across the country, particularly in Maharashtra, Rajasthan, Andhra Pradesh, Madhya Pradesh, Karnataka, Telangana and Laddakh. Fuel was costliest in Rajasthan’s Ganganagar, where petrol was sold at ₹108.94 per litre and diesel at ₹101.48 a litre on Thursday.
Pradhan discussed recent oil market developments with Barkindo, the spokesperson said. The minister “reiterated his request of phasing out production cuts and also emphasised that crude prices should remain within a reasonable band, which will be in the collective interests of both consumers and producers and will encourage a consumption-led recovery,” he added.
One of the key reasons for high domestic fuel rates is production curbs by the oil cartel. OPEC and its allies, including Russia (together known as OPEC+) on April 12 last year announced an unprecedented 9.7 million barrel per day cut in oil output, a 10th of the global output, from May 1, 2020, but did not adhere to the planned restoration of the supply.
Output cut was initiated when international oil rates fell below $20 a barrel in April last year. Benchmark Brent crude on April 21, 2020 fell to $19.33 a barrel. It, however, rose to over $50 per barrel in early 2021. With rising demand and supply constraints, oil prices hit $75.78 a barrel on Thursday intraday trade, while WTI (West Texas Intermediate) hit a session high of $73.61 and was trading close to its highest in almost three years.
India imported 227 million metric tonnes (MMT) of crude worth $101.4 billion in 2019-20 and about 78% of that came from OPEC countries, which include Algeria, Angola, Congo, Equatorial Guinea, Gabon, Iran, Iraq, Kuwait, Libya, Nigeria, Saudi Arabia, the United Arab Emirates (UAE) and Venezuela.
