The Indian government is preparing to examine the US proposal to impose a price cap on Russian oil – and whether it can use the cap as a tool in any price negotiations with Moscow.
Russia is today the second-largest supplier of oil to India, making up around 20 per cent of the country’s crude imports, up from barely 1 per cent before the war.
“Russia has threatened to cut supplies to countries that participate in the price cap plan. So, it makes no sense for us to infuriate Russia and risk our steady flow of cheap oil from there,” said an official. “The price cap, however, could become the key reference in our purchase negotiations for Russian oil and benefit us in securing cheaper deals.”
However, Indian purchases of Russian oil were already expected to slow: Indian refiners were looking to more African and West Asian supplies as shipping rates on longer voyages jumped.
According to Bloomberg, with a recent surge in freight rates, Russian oil doesn’t look so cheap, and the discount of Russia’s oil to benchmarks has narrowed.
State-owned refiners IOC and BPCL, sources said, have for the time being put a brake on buying fresh cargo from Moscow beyond December 5.
“The refiners would look at the fine print and take a call on future purchases,” the sources said. However, some cargo is already lined up beyond December 5.
The Group of Seven richest economies (G7) has been trying to enforce a price-capping mechanism on Russian oil exports by December 5, when European Union sanctions banning seaborne imports of Russian crude come into force.
India has not yet taken an official stand on joining a USled global initiative to cap prices of Russian crude oil given that the country has managed to clinch oil cargos at steep discounts.
“I think there is an exemption for Japan for Sakhalin, then there is crude which comes through the pipeline, so they have exemptions...we will have to look at it,” oil minister Hardeep Singh Puri said on the sidelines of an international conference on bio-fuels organised by automobile industry body SIAM.
India has been buying discounted crude oil from Russia against the backdrop of high prices internationally and Western nations scaling down their reliance on Russian energy. Puri said crude sourcing will continue to be a “commercial decision” for OMCs.
Biden plan
US President Joe Biden will announce a plan to sell off the last portion of his release from the nation’s emergency oil reserve by year’s end and detail a strategy to refill the stockpile when prices drop, administration officials said.
The plan is intended to add enough supply to prevent oil price spikes that could hurt consumers and businesses, while also assuring the nation’s drillers the government will swoop into the market as a buyer if prices plunge too low.
Biden’s efforts to use federal powers to balance the US oil market underscores just how much the war in Ukraine and rampant inflation has upended the plans of a president who came into office vowing to undo the oil industry and move the country swiftly to a fossil-fuel-free future.
Flexi fuel
Puri has asked the auto industry to provide flexi-fuel vehicles at various price points quickly to accelerate the adoption of blended fuel.
The Centre will provide support from the policy side. Flexi fuel comprises E10, a blend of 10 per cent ethanol with petrol, and E20, a 20 per cent ethanol blend.
“I think, we need more options to be created at various price points, including two-wheelers and three-wheelers and we need them quickly,” the minister said.
He cited the example of the launch of Japanese car maker Toyota’s first-of-its-kind pilot project on flexi fuel.
