Members of oil producer cartel Opec and allied countries have agreed to leave most of their existing oil production cuts in place as the spread of new coronavirus variants prolongs concerns about economic weakness.
Opec countries led by Saudi Arabia joined with non-members led by Russia to reach the deal in an online meeting on Thursday. Most significantly, one million barrels per day in voluntary cuts from Saudi Arabia will remain in place at least through April.
“We are not in a hurry to bring it forward ... We are cautious,” Saudi Arabia energy minister Prince Abdulaziz bin Salman told a news conference after a meeting of OPEC+ ministers, adding that Saudi Arabia would decide when to end its voluntary cut “at our time, at our convenience”. Oil prices surged back towards their highest levels in more than a year with Brent trading up 5 per cent above $67 per barrel.
A surge in crude is likely to make petrol and diesel more costly in India, unless the Modi-government reduces the excise duty on the fuels. With elections to four states round the corner, including Bengal, the ruling BJP at the Centre just may bite the bullet and cut taxes to prevent a voter backlash.
India mulls alternatives
Oil minister Dharmendra Pradhan said Opec was not reciprocating to India's approval to an output cut by the cartel during the pandemic as a gesture of support to shore up the sagging oil prices . He said India would be forced to look for alternative energy if “it is pushed to the wall”.
“During May 2020, demand (for fuels) had collapsed in the market and a country like India was supportive of production cuts in those days. The producers, especially Opec, had assured us that by the beginning of 2021, demand will be coming back and production will be as usual,” Pradhan said on Thursday.
“But I am sorry to say, the production is yet to be normal by this time, going by what they have promised,” he said, adding, “this is happening when there is a demand normalcy around the globe, especially in Asia.”
Case for fuel in GST
Petrol price can go down to Rs 75 a litre across the country if brought under the ambit of the GST, but there is a lack of political will, economists at SBI said.
Diesel will come at Rs 68 a litre and the revenue loss for the Centre and states will be only Rs 1 lakh crore or 0.4 per cent of GDP, according to the economists . The calculations were made under the assumption of crude prices at $60 a barrel and exchange rate at Rs 73 per dollar.
