India, having been through one of the deadliest
outbreaks of the Coronavirus in the world, is finally seeing a steady decline,
both in the rate of infections and deaths.
In proportion to the encouraging news, the
commercial activities are slowly limping back to normal, despite being nowhere
near what it was before the pandemic.
As the economic activities pick up the momentum, the
multiple rises in fuel price at the pumps are causing frustration at many
levels of the government; not only can it skew the recovery path, but also can cause
an inevitable political stir across the vast country – when it can least afford
one.
Although the price hike is in direct proportion to
the rise in price in crude oil in the international markets, those who look at it
from a political prism stubbornly refuse to believe that it is the case; they
try to associate it with ‘bad’ policy decisions.
The rise in oil price is causing political ripples in
the rest of Asia too. A modest increase in oil price in Sri Lanka too has
become an unpopular move, especially at a time when the country is going
through a serious outbreak of the pandemic.
The countries in the region were hoping for a
success during the talks in Vienna, Austria, involving the signatories to the
JCPOA, 2015 Iran nuclear deal; their proximity to Iran, coupled with increase
in supply, they hope, will give them an opportunity to buy crude oil at
affordable prices.
With the sixth round of talks in progress – and looming
presidential election in Iran next week – the prospect of seeing the light at
the end of the tunnel is slowly becoming unrealistic, as the initial optimism
is clearly on the wane.
In this context, the OPEC+ will come under immense
pressure to increase the production in order to maintain the price of crude oil
at the current level; the price of crude oil has risen by 39% this year.
The IEA, International Energy Agency, meanwhile, predicted
the consumption of oil reaching the pre-pandemic level – next year. It wants
oil producers to increase the production to meet the demand.
Since the IEA and the OPEC+ were at loggerhead over
a recent report by the former, questioning the feasibility of the long-term
investment in the fossil fuel sector, the willingness of the latter to take
heed of the advice remains to be seen.
All in all, the only factor that can force a
downward trend in the oil curve is any positive news that can emerge from the
talks in Vienna over the Iranian nuclear issue; even a proportional increase in
crude oil production by the OPEC+ is a distant reality, as it is not just determined
by the good-old demand-supply phenomenon.
