India supports the release of oil from reserves in order to keep prices low

*Paromita Das

As oil prices fell on news that the US was considering releasing a record amount of reserves, India said on Thursday that it supports the initiative to release the strategic stockpile in order to cool rising oil prices.
Oil prices fell on Thursday after it was revealed that the US was considering releasing up to 180 million barrels from its strategic petroleum reserve (SPR).

International standard Brent crude fell about 4% to $108.85 per barrel at around 13.30 hrs.
“Government of India (GoI) is closely monitoring global energy market situation in the backdrop of evolving geopolitical events,” Rameswar Teli, Minister of State for Petroleum and Natural Gas, said in a written response to a Lok Sabha question.

He stated that the Government of India “is ready to take all appropriate action, as deemed fit, including supporting initiatives for SPR releases, mitigating market volatility, and calming the rise in crude oil prices.”

In order to control inflationary pressures, India agreed to release 5 million barrels from its SPR in November 2021, in consultation and in parallel with major energy consumers.
Oil prices soared to 14-year highs earlier this month as a result of Russia’s invasion of Ukraine and subsequent supply concerns, causing spikes in inflation throughout the global economy.

While the International Energy Agency (IEA) will hold an emergency meeting on Friday to discuss oil supply concerns, the Organization of Petroleum Exporting Countries (OPEC+) and its allies, including Russia, will meet later on Thursday.
OPEC+ is expected to stick to its existing agreement to gradually increase output after cutting output significantly during the Covid-19 pandemic and the resulting drop in demand.

According to Teli, India maintains an SPR of 5.33 million tons, or about 9.5 days of crude oil requirement.

Furthermore, oil marketing companies (OMCs) have a current capacity of 64.5 days.

“As a result,” he said, “the total storage capacity of crude oil and petroleum products is 74 days.”

While OMCs paused retail price revision during the period when international oil prices reached a 14-year high of $139 per barrel, petrol and diesel prices have been revised 9 times since March 22 for a total of Rs 6.4 per liter.
The opposition parties have accused the government of freezing interest rates while five states, including Uttar Pradesh and Punjab, went to the polls and then raising them after the elections.

“Petrol and diesel prices have been market-determined with effect from June 26, 2010, and October 19, 2014, respectively, and are linked to the price of respective products in the international market,” Teli explained.

“Since then, public sector OMCs have made appropriate pricing decisions for gasoline and diesel in accordance with international product prices, exchange rates, tax structure, inland freight, and other cost elements.”
Aside from petrol and diesel, cooking gas prices have risen by Rs 50 per cylinder since the elections ended.

“For domestic LPG, the government continues to modulate the effective price to the consumer in order to insulate the common man from rises in international prices,” he said, without going into further detail.

India relies on imports to meet 85 percent of its oil requirements.

Iraq, Saudi Arabia, the United Arab Emirates, Nigeria, and the United States are its primary crude oil suppliers.

While OMCs have snapped up distressed Russian oil offered at deep discounts following the Ukraine war, Teli claims that “less than 1% of total crude oil (is) imported from Russia in the year 2021-22 (till January).”
“Indian oil and refining companies in the public and private sectors import crude oil from diverse sources, including sources in Russia, through business-to-business arrangements based on techno-commercial considerations and domestic requirements,” he added.