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Indian Crude Oil Basket Touches 10 Year High

Context:

The basket of crude oil that India buys has hit a decade high of $121 per barrel, but retail selling prices of petrol and diesel continue to remain frozen.

Relevance:

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

Dimensions of the Article:

  1. Key Points
  2. How are high crude oil prices impact India?
  3. India and Oil Imports
  4. Diversifying India’s Oil Imports

Key Points:

  • The increase in India’s oil import cost is mainly attributed to the increase in international oil prices
  • India is 85% dependent on imports to meet its crude oil needs and so local pump rates are benchmarked against international 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.
Current Affairs 11 June 2022

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.
Current Affairs 11 June 2022

-Source: The Hindu


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