Why in news?
Major oil buyers such as India are set to gain following Russia’s refusal to back broader cuts in crude oil production by the Organization of the Petroleum Exporting Countries (Opec).
- Crude prices are on a tailspin after Russia did not agree to Opec’s proposal for an additional production cut of 1.5 million barrels per day (mbpd), amid a slump in demand following the Covid-19 outbreak.
- Prices are expected to witness more volatility, given Russia’s geo-strategic play in denying the production cut benefits to US shale oil producers and Saudi Arabia increasing production.
- The supply glut will have a wide-ranging impact on energy markets.
How does it impact India?
- With India spending $111.9 billion on oil imports in FY19, analysts are expecting a perfect storm in the energy markets that will help major consumers such as India manage inflationary and fiscal pressures.
- India is the world’s third-largest oil buyer, and the fourth-largest liquefied natural gas (LNG) importer.
- The Indian basket represents the average of Oman, Dubai and Brent crude.
- India has already begun to reap the gains with the three state-run oil marketing firms, Indian Oil Corp. Ltd, Bharat Petroleum Corp. Ltd and Hindustan Petroleum Corp. Ltd reducing the price of non-subsidized domestic cooking gas.