New Delhi: India, the world’s third-largest oil importer and consumer, on Monday said oil prices have to be reasonable and market-determined as it expressed concern over rising rates on supplies being artificially adjusted below demand by producing countries.
With a rise in international oil prices pushing retail petrol and diesel rates to record high, India last month agreed to release five million barrels of crude oil from its Strategic Petroleum Reserves, Minister of State for Petroleum and Natural Gas Rameswar Teli said in a written reply to a question in the Rajya Sabha.
This was being done ”in consultation and parallelly with other major global energy consumers including the USA, People’s Republic of China, Japan and Republic of Korea”, he said. ”This step is being taken in a bid to control inflationary pressures and provide relief to citizens.” This is the first time ever that India, which stores 5.33 million tonnes or about 38 million barrels of crude oil in underground caverns at three locations on the east and west coast, is releasing stocks for such purposes.
While the US will release 50 million barrels of oil from its strategic petroleum reserves, the stocks to be released by India are almost equal to its daily oil consumption of 4.8 million barrels.
”India strongly believes that the pricing of liquid hydrocarbons should be reasonable, responsible and be determined by market forces,” the minister said.
In a reference to output quotas set by OPEC and its allies to regulate prices, he said, ”India has repeatedly expressed concern at the supply of oil being artificially adjusted below demand levels by oil-producing countries, leading to rising prices and negative attendant consequences.” As per the consumption pattern of 2019-20, the total capacity in the established Strategic Petroleum Reserves (SPR) facilities is estimated to provide for about 9.5 days of crude oil requirement.
Oil marketing companies (OMCs) currently have stock for 64.5 days. ”Hence, total capacity storage of petroleum products is 74 days,” he said.
India is 85 per cent dependent on imports to meet its oil needs and so domestic retail rates are aligned with prices of benchmark global commodities.
The government, he said, has been taking all ameliorating measures to safeguard the energy security of the country by ensuring energy justice for all citizens.
And, with domestic retail rates rising to record highs, it reduced the central excise duty on petrol and diesel by Rs 5 per litre and Rs 10 a litre, respectively, on November 3, he said.
This was followed by a reduction in value-added tax (VAT) on fuel by 28 states and Union territories.
”Refilling of Strategic Petroleum Reserves is undertaken keeping in mind a host of factors, including the grade of crude and international market conditions,” Teli added.
International crude oil prices get affected by many factors including supply and demand, futures’ trading, the impact of the COVID-19 scenario and geopolitical situation, he said adding that linear co-relation between pricing and any one of these factors in isolation, is indeterminable. India joined other major oil consumers in releasing stocks from SPR after members of the Organisation of the Petroleum Exporting Countries (OPEC) and its allies rebuffed repeated requests to speed up their production increases.
New Delhi has been the most forceful about flexing its muscles as a major oil consumer, cutting shipments from Saudi Arabia by about a quarter after OPEC+ extended production cuts.
Oil Minister Hardeep Singh Puri last month in Dubai had said high prices will undermine the global economic recovery.
India is the world’s third-largest oil consumer and importing nation and has been severely impacted by the relentless rise in international oil prices.
OPEC and other ally producers, including Russia, known collectively as OPEC+, have been adding around 4,00,000 barrels per day to the market on a monthly basis, which many see as not sufficient to cool prices that had been rising as demand returns to pre-pandemic levels.
India has built 1.33 million tonnes of storage at Visakhapatnam in Andhra Pradesh, 1.5 million tonnes at Mangaluru and 2.5 million tonnes at Padur (both in Karnataka).
ADNOC of the UAE has leased half of the Mangalore storage, while the remaining is with state-owned MRPL. State-owned firms and the government have stocked oil at the other facilities.
While the US stocks 727 million barrels, Japan holds 175 million barrels of crude and oil products as part of the SPR.