Smoke rises from an oil refinery during sunset. (Photographer: Luke Sharrett/Bloomberg)

PM Modi Warns Oil Producers Over High Crude Prices Hurting Global Growth

Prime Minister Narendra Modi today warned oil producers like Saudi Arabia that higher crude prices are hurting global economic growth and they should do more to bring down rates to reasonable levels.

At the third annual meeting with chief executives of top global and Indian oil and gas companies, the prime minister flagged concerns of consuming nations like India over high crude oil prices that have sent retail petrol, diesel and LPG rates to record highs, sources said.

The prime minister said crude oil prices, which are at a four-year high, was hurting global growth, causing inflation and upsetting budgets of developing countries like India.

Modi also asked chief executives why no new investments in oil and gas exploration and production are coming to the country despite the government implementing all the suggestions they made at the previous such meetings, sources said.

Later, while speaking at the the India Energy Forum, the Saudi Oil Minister Khalid A Al-Falih said, “We heard it today, loud and clear, from prime minister (about consumer pain).”

He, however, said the “pain” would have been “much louder” but the action by Saudi Arabia, the world’s largest oil exporter, to invest in creating spare capacity was used to cushion price shocks.

“Prime minister cautioned producers like myself not to kill the hen that lays golden egg, he said referring to consumers are golden hens,” Al-Falih said.

The official statement said the prime minister made a strong case for a partnership between the producers and consumers to stabilise the global economy.

Modi “highlighted that the consuming countries, due to rising crude oil prices, face many other economic challenges, including serious resource crunch. The cooperation of the oil producing countries would be very critical to bridging this gap,” it said.

He also spoke of higher acreage under exploration and sought the cooperation of the developed countries both in terms of technology and extension of coverage. He also sought the role of private participation in the distribution of the gas sector.

The prime minister also spoke about the various policy initiatives and developmental measures undertaken by his government in the sector, including liberalisation in gas pricing and marketing, open acreage licensing policy, early monetisation of coal bed methane, incentives for discovery of small fields and seismic survey at a national level. Talking of ongoing commercial exploitation, he made a special mention of extension of production sharing contracts, the statement said.

Speaking at the same conference, Oil Minister Dharmendra Pradhan said India is “facing severe headwinds from rising oil prices” which have risen by 50 percent, in dollar terms, and 70 percent in rupee terms in the past year.

Also read: As Crude Oil Prices Surge, India Inc. Has Many Reasons To Worry

The meeting, which was also attended by Finance Minister Arun Jaitley, and NITI Aayog Vice-Chairman Rajiv Kumar, was called to discuss emerging energy scenario, particularly ripples from the U.S. sanctions on Iran and volatile oil prices threatening growth.

The third annual meeting also deliberated on ways to revive investment in oil and gas exploration and production, sources said. Modi’s first meeting was on Jan. 5, 2016, where suggestions for reforming natural gas prices were made. More than a year later, the government allowed higher natural gas price for yet-to-be-produced fields in difficult areas like deep sea.

In the last edition in October 2017, suggestions were made for giving out equity to foreign and private companies in producing oil and gas fields of state-owned Oil & Natural Gas Corporation Ltd. and Oil India Ltd. But the plan could not go through in view of strong opposition from ONGC.

Also read: Oil Rises as Saudi Arabia Vows to Hit Back Against Any Sanctions

Sources said BP Chief Executive Bob Dudley, Total’s head Patrick Fouyane, Reliance Industries Director PMS Prasad and Vedanta chief Anil Agarwal attended the meeting.

The government is looking at private investments to raise domestic oil and gas production, which has stagnated for the last few years. The fuel demand, too, has been rising by 5-6 percent annually. India is dependent on imports to meet its 83 percent of the demand and more than half of its natural gas requirements.

Also read: OPEC Sees Weaker Demand for Its Crude Next Year as Rivals Surge