India may turn to Iran, Venezuela for oil imports
India may make diplomatic efforts to organise oil-consuming countries against the Organisation of the Petroleum Exporting Countries and its allies (OPEC+) as producers keep crude prices artificially high by restricting supply, and also plans to resume import of cheaper energy from countries such as Iran and Venezuela to counter the oil cartel, two officials said.
Domestic fuel prices have spiked because of rising energy demand after rapid recovery of major economies from the impact of the Covid-19 pandemic, but the oil cartel continues to restrict supply, which is a major concern for New Delhi, they said on condition of anonymity.
“The current crisis is artificially created by oil producers. Diplomatic efforts are on to ease the supply situation,” one of the officials said. Retail prices of petrol and diesel in India jumped by ₹3.63 per litre and ₹3.84 a litre, respectively, in just 12 days since February 8.
India has already requested OPEC and its allies, including Russia (together known as OPEC+) to immediately restore the output that was substantially cut to stabilise crude prices when the Covid-19 pandemic began raging and most of the global economies were under lockdowns, the officials said.
The cartel, OPEC+, on April 12 last year announced a 9.7 million barrel per day cut in oil output, a 10th of the global output, from May 1, 2020, but did not adhere to the planned restoration of the supply reduction.
“India can raise this matter at various forums such as Quad, a plurilateral platform involving the US, Japan, India and Australia. With the easing of tension at the border, New Delhi may also engage Beijing to have a common voice of world’s four-five major oil consumers. South Korea could also be an ally on this matter of common interest,” one official quoted above said. India is the third biggest oil consumer in the world after the US and China.
When OPEC+ was in crisis, India supported its output cut strategy to stabilise international oil prices that had plummeted below $20 a barrel. Benchmark crude Brent had plunged sharply to $19.33 per barrel on April 21, 2020. “Now that crude prices have jumped by over 200%, they should restore the supply immediately. India has already raised this issue at an international forum on Wednesday,” he said. Brent crude was at $64.34 a barrel on that day (February 17, 2021) and it closed at $62.91 per barrel on Friday.
Addressing the 11th The International Energy Agency (IEA)-International Energy Forum (IEF)-OPEC Outlook Symposium on February 17, petroleum minister Dharmendra Pradhan asked producers to ease the supply situation and salvage oil-consuming countries from an unprecedented jump in fuel prices.
“The key producing countries have not only revised the production cuts over and above the previously announced levels, but also added additional voluntary cuts. I had supported the joint decision by major oil-producing countries to cut oil production in April last year... Time has come once again for allowing the collective interests of both producing and consuming countries to be promoted,” Pradhan said.
SC Sharma, an energy expert and former officer on special duty at the erstwhile Planning Commission, said restricted supplies and production cuts by oil exporting countries are some of the major reasons for high oil prices. “It is believed that a gradual production increase was part of the agenda with 0.5 million barrels per day in the 4th January 2021 meeting of OPEC. However, subsequent to the meeting, Saudi Arabia announced 1 million barrels per day of voluntary oil production cuts,” he said. “There is a need to join hands with major oil importing nations such as China, India, Japan and Korea to look for a workable solution so that economic recoveries are smooth with adequate supply of oil by OPEC+ countries,” he added.
The officials mentioned above said India can resume supply of cheaper oil from Iran from a virtual zero since 2019, and also augment imports from Venezuela. “The import curbs were imposed under pressure from the Trump government. Now, either the US will help to mitigate our energy crisis or we will act in the interest of our nation,” a second official said.
Iran is expected to be the biggest beneficiary of change in the presidency that could not only help India to start its oil imports from Iran, but also boost its exports to Tehran.
India, which imports more than 80% of the crude it processes, imported about 23.5 million tonne of Iranian crude, nearly a 10th of its requirement, in 2018-19 on lucrative terms.