Focus: GS-II International Relations
Why in news?
India is moving to store oil in the US, and this is the first time India is creating an emergency reserve abroad.
Details, and why?
- India, the world’s third largest oil consumer, is looking to take advantage of low prices and guard against possible supply disruptions.
- India and U.S. have signed MoU to begin co-operation on strategic petroleum reserves.
- We are also in an advanced stage of discussion for storing crude oil in US strategic petroleum reserve to increase India’s strategic oil stockpile.
- The issue of who or how much oil will be brought for storage is still open. State-run refiners, which has term contract for US oil, could buy the oil.
- First one is to lease caverns with crude stockpile for a specific period of time when prices are low.
- The second one is to lease capacity and buy oil separately as and when prices drop to a level expected to yield handsome arbitrage later.
- The move comes amid India’s deadly border stand-off with China in Ladakh and signals of New Delhi and Washington deepening their strategic bonding beyond defence.
- The US has emerged as India’s 6th largest oil supplier since 2017.
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: Times of India