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Home / Industry / Energy /  The global oil cartel and a brewing buyer's collective

NEW DELHI : The government is drawing up a plan to counter the influence of the Saudi Arabia-led cartel on global crude oil supplies and pricing as petrol and diesel prices hit an all-time high in India.

The plan seeks to coordinate crude oil sourcing by state-run and private refiners before roping in other major Asian oil importers such as Japan and South Korea, said two government officials, seeking anonymity.

“After bringing public and private sector refiners together, we also plan to speak to major Asian energy buyers," said one of the two officials.

An earlier attempt to form a buyers’ collective between China and India, the world’s second- and third-largest oil importers, had failed to gain traction following border clashes between the two Asian neighbours last year.

“The Organization of the Petroleum Exporting Countries (Opec) has artificially kept crude oil supply lower than demand. Even product prices have gone up. It has become a sellers’ market. There are shortages in other countries also. We are not allowing such a situation to happen in India. Our oil marketing companies are ensuring availability. Opec is restoring production but at a very slow rate," said the person quoted above.

Opec accounts for around 40% of global production and a major chunk of India’s crude oil imports. The Opec-plus grouping comprising 23 countries, including Russia and its allies, has cut production, leading to prices shooting up around the world.

The rally in prices is also because of falling investments in the sector amid a global transition towards green energy. As a result, since the April 2020 lows of $19.90 a barrel following the covid-led demand meltdown, the Indian basket of crude rose to $73.13 a barrel in September, according to data from the Petroleum Planning and Analysis Cell.

To be sure, the Union and state government’s decision to retain high tax rates on transportation fuels also contributed to retail prices being at record highs of 107.59 a litre for petrol and 99.61 per litre for diesel in Delhi on Monday when India’s fuel consumption has risen 15-16% from pre-covid levels.

The response to the public-private playbook for sourcing crude oil has been very encouraging, Union minister for petroleum and natural gas Hardeep Singh Puri said at a press conference in New Delhi on Friday following the Fifth India Energy Forum by CERAWeek.

A petroleum and natural gas ministry spokesperson declined to comment on the proposed coordinated sourcing approach and the possibility of major Asian crude oil consuming nations joining the forum.

India spent $62.71 billion on crude oil imports in 2020-21, $101.4 billion in 2019-20, and $111.9 billion in 2018-19.

India had raised concerns over the high oil prices with Opec secretary general Mohammad Sanusi Barkindo during his recent visit to India. The discussions also focused on the need to find a balance between the needs of suppliers and consumers. India has been raising the issue with major oil producing countries such as Saudi Arabia, Kuwait, Qatar, the United Arab Emirates, Bahrain, US and Russia.

Higher crude prices, if not checked, will have an impact on the global economic recovery, Puri said on Friday. “It’s a win-win only if the price matrix takes care of the requirements of consumers and producers," he said.

Global energy markets are in a frenzy with the spike in energy prices across crude oil, gas and coal. India has also been requesting Opec for a reduction in the official selling price, extension of credit period from the existing 30 days to 90 days from the bill of lading, freight discount and open credit based on the credit worthiness of Indian state-run refineries.

India, one of the major Opec consumers, has also called for a global consensus on “responsible pricing" and pitched for a price and terms correction on the so-called Asian premium.

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