High oil prices will throttle recovery, Dharmendra Pradhan tells Opec
At a meeting with Opec secretary-general Mohammed Sanusi Barkindo, Pradhan reiterated his request for phasing out production cuts imposed by Opec and its ally Russia to prop up prices after they had crashed in 2020 as the pandemic wiped out demand.
According to statements issued by Opec and the oil ministry, Pradhan emphasised that crude prices should remain within a “reasonable” band for “smart” recovery.
This will be in the collective interests of both consumers and producers and will encourage a consumption-led recovery, the statements quoted him as saying.
Petrol price has shot past Rs 100 per litre in a large part of the country and diesel is selling for more than Rs 80 a litre as crude prices have risen to $75 per barrel.
High fuel prices are pinching consumers hard. High diesel prices also have a cascading effect on nearly all items since it is the main fuel for transportation.
The meeting with Opec came nearly two months after an acrimonious exchange between Pradhan and his Saudi counterpart Abdulaziz bin Salman. Pradhan had accused Opec of backtracking on its promise and artificially jacking up oil prices in January after the grouping decided to continue with the production cuts announced in the wake of 2020 demand crash.
Salman responded by saying India should use cheap oil it had stored up, referring to volumes New Delhi and state refiners bought at $19 per barrel when prices had crashed. Pradhan’s ministry then asked state refiners to reduce Saudi oil shipments and diversify sources.
There was no sign of any strain as Pradhan and Barkindo, representing a grouping that supplies 60% of India’s oil imports in May, discussed oil market developments and global economic recovery. The statements said Pradhan thanked Opec members, including Saudi Arabia, for aiding India fight the deadly second Covid wave.
India is vulnerable to crude prices as it imports more than 80% of the requirement. High oil prices impact macroeconomic parameters and limit the government’s capacity to spend on social welfare and development projects.