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OPEC and rising oil prices

Topics Covered:  Effect of policies and politics of developed and developing countries on India’s interests, Indian diaspora. 

OPEC and rising oil prices: 


Context: 

India is working to persuade oil exporting countries to moderate surging oil prices and warned that high prices would push the country to tap alternative import sources such as Iran. 

 

Current Challenges being faced by India: 

  1. With retail prices for petrol crossing ₹100 a litre in several States, ‘today’s price is very challenging’. 
  2. International oil prices have risen past USD 75 per barrel in recent days — highest since April 2019 — on consumption recovery as well as supplies being short of demand. 
  3. High oil prices are adding to inflationary pressures. 
  4. Exhausting the strategic petroleum reserves it had built up last year by taking advantage of lower oil prices. 
  5. Increasing central and state taxes on petrol and diesel are also the key reason for the prices of petrol and diesel being at record highs. 
  6. India’s oil demand has also risen by 25% in the last seven years – more than any other major buyer. 

 

Impact of OPEC: 

OPEC nations such as Saudi Arabia have traditionally been its principal oil source. But OPEC and its allies, called OPEC+, ignoring its call for ease supply curbs had led to the world’s third-biggest oil importer tap newer sources to diversify its crude oil imports. 

  • As a result, OPEC’s share in India’s oil imports has dropped to about 60 per cent in May from 74 per cent in the previous month. 

India’s oil imports: 

  1. India is the world’s third-largest consumer of crude. 
  2. United States is India’s second-largest supplier after Iraq. 

 

India’s Plan on strategic Petroleum reserve: 

Indian Strategic Petroleum Reserves Ltd (ISPRL), has constructed three strategic petroleum reserves in huge underground rock caverns at Visakhapatnam (1.33 MMT) on the East Coast, and at Mangaluru (1.5MMT) and Padur (2.5 MMT) on the West Coast. 

  • ISPRL is a wholly owned subsidiary of Oil Industry Development Board (OIDB) under the Ministry of Petroleum & Natural Gas. 
  • The new facilities approved recently can provide additional supply for about 12 days. 
  • The government of India is planning to set up two more such caverns at Chandikhol (Odisha) and Udupi (Karnataka) as per phase II through Public-Private Partnership. 
  • Thus, a total of 22 days (10+12) of oil consumption will be made available by ISPR. 

 

Insta Curious: 

Do you know the differences between Brent Crude Oil Vs WTI oil? Read Here 

 

InstaLinks: 

Prelims Link: 

  1. About Crude oil and its byproducts. 
  2. What is OPEC? 
  3. About OPEC Plus. 
  4. About ISPRL. 

Mains Link: 

Write a note on India’s Plan on strategic Petroleum reserves. 

Sources: the Hindu.