INDIA IS set to release 5 million barrels of crude oil from its strategic reserves as part of a coordinated move along with the US, China, Japan and South Korea aimed at lowering international prices. The US will release 50 million barrels of crude oil from its reserves as part of the effort.
The move is being seen as a strategic step to rein in spiralling global crude oil prices and to keep them under check. In response, the OPEC+ group of oil exporting countries, which accounts for about 50 per cent of global crude supply, has indicated that it may reconsider plans to restore production over the coming months.
“India has agreed to release 5 million barrels of crude oil from its Strategic Petroleum Reserves. This release will happen in parallel and in consultation with other major global energy consumers, including the USA, People’s Republic of China, Japan and the Republic of Korea,” the Government said Tuesday.
Supply of oil was “being artificially adjusted below demand levels by oil producing countries, leading to rising prices and negative attendant consequences”, it said.
A release of 5 million barrels of crude oil would equate to about 12. 8 per cent of India’s strategic oil reserves of 5.33 million tonnes of crude oil, which is estimated to be equivalent to 9.5 days of its crude oil requirement.
Government officials said the coordinated action from major oil consumers, particularly the US, would help reduce international oil prices. “Global crude oil prices have risen due to the efforts of Russia and Saudi Arabia. Now that the US has announced the release of oil from reserves, we are cooperating in this step to ensure that crude oil prices remain under control,” an official said.
Sources indicated that similar steps could be taken to temper steel and basic raw material prices at the international level. The initiatives are being taken to ensure that the “transient inflationary impact of rising commodities prices do not turn structural”, the official said.
In an official statement, the White house said that American consumers and businesses were “feeling the impact of elevated gas prices at the pump and in their home heating bills…because oil supply has not kept up with demand as the global economy emerges from the pandemic”.
The White house announced that the US Department of Energy would release 50 million barrels of oil from the US Strategic Petroleum Reserve to “address the mismatch between demand exiting the pandemic and supply”.
A nearly 60 per cent rise in the price of crude oil in the past year has contributed to fuel rates reaching record highs in India this year.
Despite a cut in central excise duty of Rs 5 per litre on petrol and a cut of Rs 10 per litre on diesel, fuel prices across major metros are still significantly higher than record highs prior to 2021. In the national capital, petrol is retailing at Rs 104.0 per litre and diesel at Rs 86.7 per litre — up 28 per cent and 22 per cent, respectively, from a year ago.
In 2020, the Government had increased central excise duties on petrol by Rs 13 per litre and on diesel by Rs 16 per litre as part of efforts to shore up revenues amid the pandemic.
OPEC+ has been slow to restore production levels after it imposed a supply cut of 10 million barrels per day in April 2020 when the price of Brent crude fell to an 18-year low of under $20 per barrel due to the impact of Covid.
Despite an increase in crude oil supply of 400,000 barrels per day in December, OPEC+ figures are still lower than the reference level of production for them by nearly 5.4 million barrels per day. Since hitting a low of $16 per barrel on April 22 last year, the price of Brent crude oil has been rising steadily, touching a high of $86.67 per barrel on October 25 this year. Prices have since retreated below $80 per barrel on the US announcement of releasing oil from reserves.