India urges OPEC to act to lower oil price

India urges OPEC to act to lower oil price

Riyadh: India, the world’s fourth largest oil consumer, urges OPEC to act to calm oil prices that have surged above $100 a barrel, oil minister told Reuters on Tuesday.

Oil prices have risen above $108 a barrel after a wave of unrest in the Middle East (west Asia).

Minister of petroleum and natural gas Jaipal Reddy also said there had been progress in a long-running disagreement with Iran over how to pay for oil imports.

“A country like India cannot afford such high oil price," Reddy said. “Demand for crude oil and products grow at 4.5% and is going to keep rising in 2011. India will be an even bigger consumer in the years to come."

“I think OPEC should react to address the fears of consumers," he added. “They must do something, they must raise output to moderate the rise of the oil price."

Reddy said he thought current high prices were not based on any gap between supply and demand but were caused by political factors and unrest in the Middle East.

He was speaking in the Saudi capital Riyadh, where concerns about the impact of a tide of popular revolution and its significance for oil have dominated discussions on the sidelines of producer-consumer talks.

In the current fiscal year ending 31 March, Indian state-owned oil retailers’ revenue losses on fuel sales are expected to touch Rs1 trillion, Reddy said last week, putting pressure on finances as the government compensates for a part of such losses.

In June 2010 India granted autonomy to oil firms -- Indian Oil Corp, Hindustan Petroleum and Bharat Petroleum -- to fix prices of petrol but decided to keep controls on diesel, cooking gas and kerosene to rein in inflation and protect the poor.

Iran Oil Payment

Reddy confirmed that the Indian government will certify every transaction with Iran as a bona fide payment towards the import of oil and vouch that the money is not being used by Tehran to boost its nuclear programme.

“There’s no longer a deadlock, we have made progress ... The German central bank has given us a certificate saying that the transactions don’t violate the sanctions, this is now in the process of being resolved," he said.

Iran is India’s second-largest crude oil supplier. “We have no option but to buy from Iran, of course we want to do it without violating sanctions," Reddy added.

The Reserve Bank of India (RBI) said in December payments to Iran could no longer be settled using a clearing system run by Asian central banks, winning praise from Washington, but putting at risk import of about 400,000 barrels per day of oil.