India, others tap reserves to hit at Opec+
India on Tuesday joined the US, China, Japan and South Korea to release crude oil from their respective strategic reserves, the first such coordinated move by major consumers to calm surging fuel rates as the producers’ cartel continues squeezing supply to keep prices high.
“India has agreed to release 5 million barrels of crude oil from its Strategic Petroleum Reserves. This release will happen in parallel and in consultation with other major global energy consumers including the USA, People’s Republic of China, Japan and the Republic of Korea,” the oil ministry said.
The US announced on Tuesday that it will release of 50 million barrels of crude oil from its strategic reserve.
“This release will be taken in parallel with other major energy consuming nations including China, India, Japan, Republic of Korea and the United Kingdom,” the White House said in a statement.
India has three strategic petroleum reserves with combined storage capacity of 5.33 million tonnes (about 38 million barrels), sufficient to meet country’s crude oil requirements for about 9.5 days.
The three operational crude oil storage facilities are located in Vishakhapatnam (1.33 million tonnes), Mangalore (1.5 million tonnes) and Padur (2.5 million tonnes).
State-run Indian Strategic Petroleum Reserve Limited, which operates the facilities, filled the reserves last year when the Covid-19 pandemic hit global economies and fuel demand plummeted, crashing international oil prices to below $20 per barrel on April 21, 2020. Taking advantage of the low prices, India had filled its three strategic reserves to the brim, with an average cost of about $25 per barrel.
India joined hands with other major consumers after the producers’ cartel, the Organisation of the Petroleum Exporting Countries and its allies, including Russia (together known as Opec+), turned a deaf ear to its plea for normalising output to match growing global demand post-pandemic.
After oil prices plunged below $20 due to global lockdowns to contain Covid-19 in April 2020, Opec+ on April 12 announced an unprecedented 9.7 million barrel per day cut in oil output, a 10th of global output. Despite rising demand, they did not adhere to the planned restoration of supply, which spiked international oil prices.
“India strongly believes that the pricing of liquid hydrocarbons should be reasonable, responsible and be determined by market forces. India has repeatedly expressed concern at supply of oil being artificially adjusted below demand levels by oil producing countries, leading to rising prices and negative attendant consequences,” the ministry said in its statement.
It said Prime Minister Narendra Modi has been “consistently reviewing the high petroleum/diesel prices” domestically.
In order to provide relief to the common man and check inflationary pressure, the Union government slashed central excise duty on petrol and diesel by ₹5 per litre and ₹10 a litre, respectively, from November 4. Several states followed the suit by reducing value-added tax on auto fuels. Petrol and diesel were selling at ₹103.97 and ₹86.67 per litre in Delhi at IOCL outlets on Tuesday.