Minister of Petroleum & Natural Gas Hardeep Singh Puri has urged the Organization of the Petroleum Exporting Countries (OPEC) to bring affordability in the oil markets while raising concerns about OPEC's crude production cuts and their impact on the global energy sector.
Cumulatively, OPEC and OPEC+ have reduced the availability of oil by 4.96 mb/d (around 5% of global oil demand) from the market since 2022, spiking Brent prices from around $72 per barrel in June to $97 per barrel in September 2023.
On the sidelines of the annual Abu Dhabi International Petroleum Exhibition and Conference (ADIPEC) 2023 on Tuesday, Puri had a bilateral discussion with Secretary General-OPEC Haitham Al-Ghais. During the discussions, the minister highlighted that due to the production cuts carried out by OPEC (10) and OPEC+ countries from August 2022 onwards, effectively around 5% of the total global oil availability has been removed from the market, causing crude oil prices to rise 34% in just the last three months.
These production cuts have been made despite growing energy demand. Brent Crude oil prices jumped to around $97 per barrel in September, placing severe strains on the capacities of most oil importing consuming countries.
The minister highlighted the geopolitical crisis of 2022 has added to existing inflationary pressures and created a real risk of recession in large parts of the world.
"While Government of India, through positive intervention had effectively cushioned its economy from spiralling energy prices, the world needs to be cognizant that around 100 million people have been pushed away from cleaner fuels, back to coal and firewood in the last 18 months," the minister further notes.
Puri wondered whether the global economy is again going to witness a situation similar to the economic turmoil of 2008, which had become a self-fulfilling prophecy. Brent prices had initially soared from $93.60 per barrel in January 2008 to $134.3 per barrel in July 2008, fuelling an accelerated global economic meltdown, leading eventually to demand destruction and very low oil prices.
In the interest of global good, the Union minister advocated balancing global energy markets by ensuring that crude oil prices do not outstrip the paying ability of the consuming countries. Puri urged OPEC to recognise the gravity of the current economic situation and urged the Secretary-General to use his office to imbue a sense of pragmatism, balance and affordability in the oil markets.
According to foreign brokerage Morgan Stanley, lower crude oil prices would provide flexibility to cut domestic prices in India, reduce inflation and increase the chance of a rate cut before the end of 2023.
Last week, the Centre hiked the windfall tax on domestically produced crude oil to ₹12,000 per tonne from ₹10,000 earlier.