India has urged oil-producing nations to raise output so to boost supplies to emerging economies and ease crude prices, which have risen to record highs in recent months and threaten to slow the world economy.
Crude prices touched an all-time high of nearly $140 per barrel earlier this week, driven by speculation that the world might not be producing enough oil to meet the burgeoning demand from fast growing developing countries, especially China and India. The spike in crude prices has hit India hard, pushing up its trade deficit and inflation to worrying levels.
“(I) request you to advise major oil producing countries to raise their output to calm the market further and revitalise the global economic growth,” Petroleum Minister Murli Deora wrote in a letter to Saudi Oil Minister Ali al-Naimi.
Deora’s letter, sent on Tuesday, came in response to an invitation to attend the meeting of major oil producers and consumers in Jeddah on June 22.
Saudi Arabia is the world’s largest oil exporter and it has unilaterally decided to raise production by 300,000 barrels per day.
“These actions would help supply side management and would thus stabilise the current oil market,” Deora said. “I would like to thank you for the initiative taken and request you to advise other major oil producing countries also to raise their output to calm the market further and revitalise global economic growth."
Stung by skyrocketing global crude oil prices the government recently announced a Rs 5 a litre increase in petrol, Rs 3 on diesel and Rs 50 per LPG cylinder together with customs and excise duty cuts to combat spurt in global oil prices.
India’s oil imports during the last fiscal year (April- March 2007-08) were valued at $ 77.03 billion.
Billionaire investor T. Boone Pickens has predicted that crude oil prices could hit $150 a barrel in the next six months, while investment firm Goldman Sachs raised its forecast for the average price of crude oil for the second half of 2008 to $141 a barrel.
“The world is in the midst of an unprecedented rise in oil prices which have risen from about 29 dollars per barrel in 2000 to touch 139 dollars a barrel in June 2008,” Deora said.
Analysts believe the recent rise in retail prices of petrol and diesel would have a direct impact of between 0.50 and 0.60 percentage points in the inflation rate and an indirect impact of about 0.40 percentage points.
“Marco economic conditions and volatile capital markets have simultaneously thrown financial markets into turmoil leading to significant cost pressures from an all round rise in prices of commodities,” Deora said.
The current high oil prices coupled with the turmoil in the financial markets would seriously impact the economic growth of most countries and in the longer term affect both producers and consumers, he wrote in his letter to the Saudi Petroleum and Natural resources minister.
Al-Naimi in his letter to Deora underlined the need for having a dialogue between oil producers and consumers to tide over the crisis.
“Through frank and honest discussion, producing and consuming nations and the industry have the opportunity to contribute to the greater stability of the world petroleum market and to mitigate any damage to the global economy, especially the economies of developing countries,” he wrote.