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Editorials/Opinions Analyses for UPSC – 4 June 2021

Contents

  1. Why oil prices are rising? Impact on India
  2. World getting closer to Internet from the skies

Why oil prices are rising? Impact on India

Context:

Crude oil prices have hit a two-year high with Brent crude rising above the $71 per barrel mark on May 2021, hitting the highest level since May 2019 as key oil-producing countries announced that they would adhere to plans entailing a gradual increase in crude oil production.

Relevance:

GS-III: Indian Economy (International Trade, Mobilization of Resources, Growth and Development of Indian Economy), GS-III: Industry and Infrastructure

Dimensions of the Article:

  1. Why are crude oil prices rising?
  2. How are high crude oil prices impact India?
  3. India and Oil Imports

Why are crude oil prices rising?

  • Crude oil prices have been rising steadily since the beginning of 2021 when Brent Crude was trading at about $52 per barrel buoyed both by hopes of improving demand due to economic recoveries across geographies as well as supply cuts by key oil-producing countries.
  • The Organisation of Petroleum Exporting Countries extended supply cuts made in 2020 when crude oil prices had reached a low of under $19 per barrel through the first five months of 2021.
  • Saudi Arabia notably made an additional voluntary production cut of 1 million barrels per day between February and April 2021 of which only 250,000 barrels of production has been restored in May and 750,000 barrels of production is set to be restored over June and July 2021.
  • Experts have noted however that the gradual withdrawal of cuts is unlikely to have any significant impact on prices as demand for petroleum products increases as demand increases spurred by increasing economic activity.
  • A potential breakthrough in international efforts for a new Iran nuclear deal which would see international sanctions on Iranian oil removed would also not have a major impact on oil prices according to OPEC which expects that any increase in crude oil production from Iran would happen gradually and would not destabilise crude oil prices.

How are high crude oil prices impact India?

  • Rising crude oil prices have contributed to petrol and diesel prices rising to record high levels across the country.
  • The price of petrol has been hiked by Rs 10.8 per litre since the beginning of the year while the price of diesel has been hiked by Rs 11.5 per litre in the same time period.
  • Officials at oil marketing companies have however noted that even current record-high prices are lower than what refiners should be charging in line with international prices and that prices are set to rise further unless there is a cut on levies on autofuels or a fall in crude oil prices.
  • The prices of petrol and diesel are benchmarked to a 15-day rolling average of the international prices of the petroleum products.

India and Oil Imports

  • India is heavily dependent on crude oil and LNG imports with over 82% import dependence for crude oil and more than 45% for natural gas/LNG.
  • India generated more than 35 million tons of petroleum products from indigenous crude oil production whereas the consumption of petroleum products is more than 200 million tons. Similarly, India generated 30 bcm natural gas locally against the consumption of almost 60 bcm (double).
  • LNG price is linked to the prevailing crude oil price in global markets.
  • India is the third biggest oil importer after US and China in 2018 and expected to occupy second place surpassing the US in 2019.

Diversifying India’s Oil Imports

  • India’s imports of Middle Eastern oil plunged to a four-year low in 2019.
  • India imports about almost 85% of its oil needs and traditionally relies on the Middle East for the majority of its supplies, however, the region’s share of India’s crude shrank to 60% in 2019.
  • The reason being: a record output from the United States and countries like Russia offered opportunities for importers to tap other sources.

-Source: Indian Express


World getting closer to Internet from the skies

Context:

Following the successful launch of 36 satellites on May 28, OneWeb’s Low Earth Orbit (LEO) constellation reached 218 in-orbit satellites. The company only has one more launch to complete before it obtains the capacity to enable its ‘Five to 50’ service of offering internet connectivity to all regions north of 50 degrees latitude.

Relevance:

GS-III: Science and Technology

Dimensions of the Article:

  1. What is OneWeb?
  2. LEO technology
  3. Criticisms of LEO satellites

What is OneWeb?

  • OneWeb is a global communications company that aims to deliver broadband satellite Internet around the world through its fleet of LEO satellites.
  • In 2010, the company declared bankruptcy but was able to resume operations following an inflow of investment from a consortium consisting of the UK Government, Hughes Communication, Sunil Mittal’s Bharti Global Limited, SoftBank and Eutelsat, a leading European satellite operator.
  • OneWeb satellites are built at a OneWeb and Airbus joint venture facility in Florida that can produce up to two satellites a day.
  • The launch roll-out of the satellites is facilitated by French company Arianespace using Russian made Soyuz rockets.

The company has announced plans to enter the Indian market by 2022.

LEO technology

  • LEO satellites have been orbiting the planet since the 1990s, providing companies and individuals with various communication services. LEO satellites are positioned around 500km-2000km from earth, compared to stationary orbit satellites which are approximately 36,000km away.
  • Latency, or the time needed for data to be sent and received, is contingent on proximity. As LEO satellites orbit closer to the earth, they are able to provide stronger signals and faster speeds than traditional fixed-satellite systems.
  • Additionally, because signals travel faster through space than through fibre-optic cables, they also have the potential to rival if not exceed existing ground-based networks.
  • However, LEO satellites travel at a speed of 27,000 kph and complete a full circuit of the planet in 90-120 minutes. As a result, individual satellites can only make direct contact with a land transmitter for a short period of time thus requiring massive LEO satellite fleets and consequently, a significant capital investment.
  • Due to these costs, of the three mediums of Internet – fibre, spectrum and satellite – the latter is the most expensive.
  • OneWeb’s target market will therefore be rural populations and military units operating away from urban areas.

Criticisms of LEO satellites

  • During the days of the Sputnik and Apollo missions, governments dominated and regulated space-based activities. However, today, the balance of power has shifted from countries to companies.
  • Even government entities like the US Department of Defence have turned to private providers, entering into a contract to buy satellites from SpaceX.
  • As a result, there are questions related to who regulates these companies, especially given the myriad of nations that contribute to individual projects.
  • OneWeb has to receive requisite licences to operate in each country, including, in most cases, from the country’s telecommunications sector and department of space. All those considerations make for a complicated regulatory framework.
  • There are logistical challenges with launching thousands of satellites into space as well. Satellites can sometimes be seen in the night skies which creates difficulties for astronomers as the satellites reflect sunlight to earth, leaving streaks across images.

-Source: Indian Express

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