Petrol At Rs 100: India Asks OPEC To Ease Output Cuts

India, the world's third-biggest oil consumer, on Wednesday urged Saudi Arabia and other global oil producers to ease production cuts, saying 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, Oil Minister Dharmendra Pradhan said.

International oil prices have been on the boil since Saudi Arabia pledged additional voluntary output cuts of 1 million barrels per day in February and March under a deal between the Organization of the Petroleum Exporting Countries and its allies including Russia, a group known as OPEC+.

This has resulted in oil prices rising to $63 per barrel, the highest level in more than a year, leading to retail pump rates in India breaching the Rs 100 a litre mark.

"The rising crude oil prices during the last few weeks is hurting the fragile global economic recovery due to significant demand contraction, which might even mirror the impact of Covid-19 in its initial stages," Pradhan said at the 11th IEA IEF OPEC Symposium on Energy Outlooks.

India, he said, had contained the inflationary pressures on several fronts but not those impacted by crude prices.

"The price-sensitive Indian consumers are affected by rising petroleum product prices. It also affects demand growth, which could potentially impact the delicate aspirational economic growth trajectory not just in India but in other developing countries as well," he said.

Petrol sales, which reached pre-Covid levels six months back, fell below pre-pandemic levels in the first half of February.

"There is an urgent need to allow consumption-led recovery, that has just taken root in several emerging and developing economies, including India to continue in the coming months," he said.

Referring to the output cut, Pradhan said the collective interests of both producing and consuming nations need to be promoted.

"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 amid a sharp fall in demand due to the Covid pandemic.

"Time has come once again for allowing the collective interests of both producing and consuming countries to be promoted," he said.

With Saudi Oil Minister Abdulaziz bin Salman Al Saud and OPEC Secretary General Mohammad Sanusi Barkindo listening, he said a balanced approach needs to be adopted at this juncture.

"It is in this spirit of allowing demand recovery to take primacy over crude prices, at least over the next few months, I am appealing for easing of production cuts by the key oil-exporting countries, including the OPEC and OPEC Plus group.

"I have always maintained that prices should be reasonable and responsible, which means that we do not favour too low crude prices also," he said.

India, he said, remains dedicated and committed to evolving a sustainable energy future for all, and will leverage all available energy resources.

Price of petrol crossed the Rs 100 per litre mark in Rajasthan after fuel rates were hiked for the ninth day in a row. Since India imports the majority of its oil needs, retail rates are benchmarked to international prices, which have spiralled in recent weeks.

Opposition parties including Congress have criticised the price hikes, blaming it on the Modi government raising taxes to scoop out the benefit that arose from international oil rates plunging to a two-decade low in April/May last year. While global rates have rebounded with pick up in demand, the government has not restored the taxes, which are at a record high.

Pradhan said the world has seen a major shift in the global energy dialogue processes. "We had witnessed the largest oil supply cut in history to match the massive global demand destruction ever. We saw first-ever coordination efforts to cut production by OPEC, OPEC Plus and other key producing countries."

With the advent of Covid-19 vaccines and a better understanding of the pandemic, the revival of economies and the resulting energy demand are being witnessed.

"We have to build back better collectively while considering the unique national circumstances," he said.

India, he said, has emerged as the key centre for global energy demand. While the world's total primary energy demand is projected to increase at about 1% per annum till 2040, India's energy demand would grow at about 3% per annum till 2040.

OPEC and EIA in their near-term outlook estimate that global fuel consumption will grow by 5.6 to 6 million barrels per day in 2021, where more than half of this growth will come from India and China.

Natural gas demand is also projected to increase three-fold by 2040.

"India's energy sector has bounced back with remarkable resilience. Our energy demand has almost recovered to pre-Covid levels, including for petroleum products, on the back of rejuvenation of economic activities," Pradhan said.

Stating that the nation is shifting towards a gas-based economy, he said investments of $60 billion will be made in developing gas infrastructure, including pipelines, LNG terminals and city gas distribution network.

While 15,000 kms of new pipelines are being added to the 18,000-km network, LNG import capacity is being expanded from about 41 million tonnes per annum to 57 million tonnes. Coverage of city gas projects is being expanded to cover 70 per cent of the country's population by 2030.

"India remains committed to environmental and climate causes with a massive thrust on renewable energy and the energy efficiency measures," he said, adding in the past six years, India has increased its renewable power portfolio from 32 GW to almost 100 GW.

"We are well on track to achieve renewable energy capacity of 450 GW by 2030," he said. "As we significantly increase cleaner energy sources to fuel our economic expansion, we would continue to obtain the baseload energy needs from oil and gas."