India believes long term supply contracts will provide predictable and stable oil pricing, and pointed out that high oil prices are hurting the nascent and fragile global economic recovery. Economists warn that the jump in prices will have economic consequences of higher energy costs.
Oil Minister Hardeep Singh Puri, speaking at the India Energy Forum by CERAWeek, said there was a mismatch between demand for oil and the supplies producers such as OPEC+ were making and there was a case for raising the production. He said the world needs predictable, stable and affordable prices for it to recover back to pre-pandemic levels.
“Global economic recovery can be undermined if energy prices remain high. That is not only true for developing countries like India but also other industrial democracies,” Puri said. “It is in everybody’s interest that we sustain global economic recovery. And therefore, it is in the interest of both the producing countries and the importing countries to have stable and affordable energy.”
The minister said energy is crucial to the revival of the global economy after the devastating pandemic. Puri believes high oil prices will slow down the recovery and as a consequence the demand. “There is a direct co-relationship between revival of economic activity with the price. I am sure our friends in OPEC+ will factor in the sentiments of consuming nations. We look forward both as a consumer and as a large economy, one whose energy requirements are only likely to grow, to energy transition being predictable and orderly.”
Tarun Kapoor, Oil Secretary, said importing nations like India currently enter into a one-term contract to buy oil from OPEC nations such as Saudi Arabia and Iraq. These contracts provide stability of only volume and the price is the one that prevails in the international market at the time of delivery. “Much like gas contracts that are up to 25 years duration and priced at some benchmark, oil too should have long-term contracts with pricing benchmarked at some alternate fuels such as coal or even gas.”
Puri highlighted that India’s oil import has climbed from USD 8.8 billion in June 2020 quarter to USD 24 billion this year because of a spike in global oil prices. “India believes energy access has to be reliable, affordable and sustainable.” The minister said economic recovery after a devastating pandemic has been fragile and it is further being threatened by high prices.