The pendulum of the price of crude oil continues to
oscillate in a path that defies the existing mathematical/statistical models.
The surrounding uncertainty, meanwhile, seems to be
pushing the major importers to look beyond the producers closer to home, as the
rising oil price has already put many developing countries in danger of slipping
into a spiral of inflationary whirlpool.
The rise in India’s oil imports from the US in 2020
is a case in point: despite the great distance involved and shipping costs,
India, the world’s third largest consumer of the crude oil, imported 10.7
million tonnes of crude oil from the US in 2020 – almost 5.4 % of its total
imports, 204 million tonnes.
On the eve of the ill-fated, latest OPEC+ meeting, Dharmendra
Pradhan, the former energy and petroleum minster, had a meeting with the Secretary
General of the OPEC+; although what they discussed was not disclosed in public –
and in full – Mr Pradhan may have raised the need of increasing the production;
by then, the rising oil price at the pumps had created hot political issue for
the Indian government, putting the latter under pressure to reduce the taxes
levied on the commodity.
It did not materialise as the OPEC+ meeting ended in
an unusual, public, acrimony between two traditional Arab allies, with no
agreement in sight. Mr Pradhan, meanwhile, lost his ministerial portfolio in a
hastily-arranged cabinet reshuffle.
Mr Pradhan, like anyone in the region, may have
anticipated a positive outcome from the talks on the JCPOA, 2015 nuclear deal,
if the OPEC+ stubbornly sticks to production cuts. The talks are stalled after
six rounds and there is no immediate sign of Iran returning to the crude oil markets
as a legitimate player.
If Iran was allowed to sell its oil, India would
have cashed in on an additional supply, being at an additional advantage over
its close proximity to Iran.
At present, the main crude oil supplier in the
Middle East for India is Iraq. In 2020, Iraq’s export stood at 23% of the total
need; it’s far above what India imported from the rest of the Middle Eastern
producers.
Since there are chaos in Iraq on political front with
growing social unrest, India knows the volatility of the supply in the event of
the situation getting worse. In addition, Iraq is sandwiched between the
regional ambitions of Iran and the US.
In this context, India will be forced to look for alternative
sources to address the issue of critical crude oil imports, unless the production
by the OPEC+ increases; there is a strong possibility that the US sees an
opportunity to increase its share of India’s imports in the coming months,
unless OPEC+ members iron out their differences.
