Faced with the steep rise in crude oil prices, the government is evolving a strategy to see how the Asian premium—a $1-1.5 surcharge that Asia pays for buying every barrel of oil from the Persian Gulf—can be reduced. The petroleum ministry hopes to push for the development of a Pacific Asian crude index given that incremental demand is coming mainly from China, India and Japan.
With 73 per cent of India’s crude oil requirement being imported, any reduction in the Asian premium would be big relief. The Indian crude oil basket has been hovering over $88 a barrel as the most widely tracked oil index, the Nymex, threatened to touch $100 a barrel.
Crude oil prices in Asia have remained higher than in Europe and US by $1-1.5 per barrel since 1992. This problem has a far-reaching effect not only on oil, but also on all areas where energy prices are linked to crude oil prices.
The government has been concerned at the implications of its decision to freeze prices of automobile and cooking fuels since February. Oil companies Indian Oil Corp, Bharat Petroleum and Hindustan Petroleum are losing over Rs 240 crore a day on sale of petrol, diesel, cooking gas and kerosene.