India, the third largest crude oil importer and consumer, plans to scale up its import from the US and Africa following Saudi Arabia’s decision to raise official selling price (OSP) of oil shipments to Asia in May. The action by Saudi, the world’s largest crude exporter, was largely conceived as a retaliation to India’s plan to cut crude imports from there.
The Modi government had asked the Saudi kingdom to increase crude production as it will reduce the demand and lower the prices. Petroleum Minister Dharmendra Pradhan earlier said that the high crude prices had been hurting the developing countries in their economic recovery from COVID-19.
In response to Pradhan’s demand, his Saudi counterpart Prince Abdulaziz bin Salman advised India to use the stocks of crude it bought cheaply during the price slump in 2020. Pradhan termed Abdulaziz’s response as “undiplomatic”.
In four and a half months, until mid-March, the Brent crude had jumped around 80 per cent to $70 a barrel. The price has moderated to $63 at present. The Modi government has been at the receiving end of the opposition’s political attacks whenever the price increases above $67 a barrel, as it slingshots petrol price to Rs 100 a litre.
Reducing central taxes to control the prices of petrol, diesel and LPG is never an option as the government has been struggling to bridge the widening fiscal deficit and rising inflation.