List of Contents
What is the News?
India will be releasing 5 million barrels of crude oil from its strategic petroleum reserves in coordination with countries like the US, Japan, China, Britain and the Republic of Korea with the aim of bringing down oil prices.
Why is India releasing 5 million barrels of crude oil from its strategic petroleum reserves?
India believes that oil prices should be reasonable, responsible and be determined by market forces.
However, the oil-producing countries have kept the oil supply below demand to sustain high oil prices.
Due to this, India is particularly at a disadvantage as any increase in global prices can affect its import bill, stoke inflation and increase the trade deficit.
How will this release impact India’s crude import plans?
India’s plan to release crude oil from its strategic petroleum reserves is unlikely to change India’s crude import plans, as 5 million barrels is roughly equivalent to a day’s consumption in the country.
Hence, this implies that it is more of a symbolic gesture in tandem with the US, Japan and other major economies to come together against OPEC’s plan of keeping high crude prices.
India’s Strategic Petroleum reserves
India has built 1.33 million tonnes of storage at Visakhapatnam in Andhra Pradesh, 1.5 million tonnes at Mangalore and 2.5 million tonnes at Padur (both in Karnataka).
This is the first time ever that India is releasing oil from its strategic petroleum reserves.
India’s Dependence on Oil
India is dependent on imports to meet 85% of oil demand and 55% of natural gas requirements. OPEC accounts for a majority of India’s crude oil imports and around 40% of global production.
According to data, India has spent around $62.71 billion on crude oil imports in FY21, $101.4 billion in FY20, and $111.9 billion in FY19.
Source: This post is based on the following articles
- “India to free up oil reserves to cool prices” published in Livemint on 23rd November 2021.
- “India to release 5 mn barrels of crude from reserves in bid to cool prices” published in Business Standard on 23rd Nov.2021.
- “India agrees with the US, to release oil from the stockpile to cool prices” published in TOI on 23rd Nov, 2021.