Government urges OPEC+ to fulfill promise of stable oil prices

Retail petrol and diesel prices have been going through the roof

With retail petrol and diesel prices going through the roof, India on Thursday again urged oil producers' group OPEC to ease production curbs to fulfill their promise of stable oil prices.

Though the average price of crude oil India imports was less than USD 50 per barrel between April and December 2020 and comparable to 2019-20 average rate of USD 60.47 in months thereafter, petrol and diesel prices are at a historic high now as the government has so far not rolled back the taxes it levied when prices plummeted almost a year back.

The record taxes coupled with international rates returning to pre-COVID levels on resurrecting demand have meant that petrol has crossed Rs 100 mark in some places in Rajasthan, Madhya Pradesh and Maharashtra.

Speaking at the CERAWeek conference by IHS Markit, Oil Minister Dharmendra Pradhan said India, where fuel demand is recovering to pre-pandemic levels, wants reasonable and responsible oil prices.

India, the world's third-biggest oil importer and consumer, had supported the decision of the oil producers' cartel OPEC and its allies to cut production last year in view of the oil demand collapsing due to the spread of COVID-19.

"At that point in time, the producers especially OPEC assured the global market, that by thebeginning of the 2021 demand will be coming back and production will be as usual. But I am sorry to say the production is yet to be normal," he said. "If you do not supply properly, if there is a gap in demand and supply artificially (created), there is a price rise."

Crude has rebounded this year to over USD 62 per barrel after the Organization of Petroleum Exporting Countries and its allies (called OPEC+) slashed output to drive a rebalancing of the market following last year's slump. The aggressive supply management has helped to drain inventories while worldwide demand is recovering with the rollout of vaccines.

OPEC+ are meeting this week to decide on output policy.

Pradhan said, "it may suit some of our friends (in OPEC) but in emerging countries like India (where) our fiscal scope is very challenging... we need a reasonable price of our energy, responsible price of energy."

Excise duty was raised by Rs 13 and Rs 16 per litre on petrol and diesel between March 2020 and May 2020 and now accounts for more than one-third of the Rs 91.17 a litre price of petrol in Delhi and 40 per cent of Rs 81.47 per litre rate of diesel.

The basket of crude oil India imported in February averaged USD 61.22 per barrel and USD 54.79 in January this year. It had fallen to USD 19.90 in April last year and was between USD 40 and USD 49 during June and December.

India imports about 85 per cent of its oil needs and local retail rates are benchmarked to international prices.

Pradhan said the price of oil should be affordable and one that does not pinch the treasury.

"I never support price collapse (of last year) and India supported production cuts," he said. "But today, we expect the producing countries, especially OPEC and its friendly countries, should do business as usual and (do) what they had promised. And out of that, responsible, reasonable price will come, which is not today."

He said India will be forced to look for alternative energy if it is pushed to the wall.

"So for the balanced growth, for the benefit of all the stakeholders the price should be that where we can purchase it (and it) should not affect us, it should not affect my treasury," he said.

Last month, Pradhan had conveyed to OPEC that rising international oil prices are hurting economic recovery and demand.

Demand recovery should take "primacy" over oil prices at least for the next few months, he had said.