India opens reserve ‘in trust’ with US; December 2 If cheated …? | India Oil Price | Crude Oil

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Kochi എന്താണ് What is behind the decision of US and India to release crude oil from stockpile to market to reduce fuel prices? Although it is clear that inflation across the country in the wake of rising fuel prices has led countries to such a move, there are no political motives. Countries, including India, have been reeling from rising fuel prices. There is a lot of pressure on the US and Indian authorities to contain inflation.

Many countries are aiming to create an image of inflation and seek votes in the run-up to various elections and to open up crude oil reserves. U.S. President Joe Biden is eyeing next year’s by-elections. The issue is about the Narendra Modi government in India, which will hold assembly elections in major states next year. The Assembly elections will be held next year in key states including Uttar Pradesh, Punjab and Gujarat.

Internationally, crude oil prices need to fall if the central government is to reduce fuel taxes and increase revenue. India is also looking at ways to reduce crude prices as further tax cuts could affect government revenue. The US and India, among others, are aiming to pave the way for this by bringing stockpiles to market.

Wait till December 2!

But we will have to wait until December 2 to see how effective it will be for the US-led various countries (mostly Asian) to open their reserves. If the then Organization of the Petroleum Exporting Countries (OPEC) meeting decides to increase production, the US plan can be considered a success. But if OPEC Plus countries decide to cut production, it will backfire on countries including India.


A view of an oil refinery in Iraq. Image: HAIDAR MOHAMMED ALI / AFP

കൂടി Corona expansion in many countries is also holding back OPEC countries from their decision to increase production. Although the decision to produce an additional 4 lakh barrels per day per month was made earlier, the pace of action has not yet picked up. Discussions on Iran’s nuclear embargo on November 29 in Vienna will also influence the decision of the producing countries.

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How long does the result last?

There are also assessments that the US move is not in the long run. It is estimated that 9.89 crore barrels of crude oil is consumed in a day globally. It is estimated that 50 million barrels from US reserves will be enough for 5 days of global use. India’s daily crude oil consumption is 48 lakh barrels. India has now decided to supply 50 lakh barrels from its reserves.


oil-refinery
Image: AFP

The UK has also said it will allow the release of 1.5 million barrels from private sector reserves. Japan has said it will release its reserves, but China and South Korea have said they will not. This is the first time the US has made such a move in collaboration with Asian countries. Oil-producing countries, including Russia and Saudi Arabia, have been pushing for a decision to increase production to meet the growing demand for petroleum products in the wake of rising international oil consumption following the change in Kovid regulations.

U.S. at the forefront of reserves

The reserves are stored in underground reservoirs for use in times of crisis due to war or climate change and in the event of severe fuel shortages. The 29 member countries of the International Energy Agency, including the UK, Germany, Japan and Australia, also have reserves. The largest is in the US. Second is China and third is Japan. It is permissible to collect quantity equivalent to 90 days of import.


us-oil
When the Apollo crude oil tanker landed in the Pacific Ocean. Image: Patrick T. FALLON / AFP

The U.S. has 60.6 million barrels of reserves in 4 centers. This is for one month’s use of the fuel required by the US. The U.S. has previously opened three reserves of crude oil – OPEC member Libya’s war in 2011, Hurricane Katrina in 2005, and the Gulf War in 1991. U.S. crude oil reserves began in 1975, when oil prices soared following the Gulf blockade and the country began to move into a financial crisis.

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For the first time in the history of India, reserves are being collected. It is estimated that India has reserves of about 53 lakh tonnes. India has crude oil reserves in Visakhapatnam (.313.3 lakh tonnes), Mangalore (15 lakh tonnes) and Padur (25 lakh tonnes). It has enough fuel to meet India’s fuel demand for about 9 days. The Indian Strategic Petroleum Reserve, established in 2005 under the Indian Oil Industry Development Board, is responsible for the stockpiling of crude oil in India.

China started stockpiling 15 years ago. China and India, the world’s second and third largest oil consumers, are associate members of the International Energy Agency. Japan has legal restrictions on the use of reserves for price control. Therefore, Japan plans to maintain the legal minimum stock and supply the rest to the market.

Will it be cut?

Oil-producing countries, including Russia and Saudi Arabia, have promised to produce more than 4 million barrels a day, but production has not yet reached global demand. If OPEC decides to increase production, India and the US can benefit. Otherwise, it will be a major setback for countries including India. OPEC has previously warned that production could be cut if reserves were used up.


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More or less

At the same time, crude oil prices have risen more than 50 percent this year. Crude prices have remained above $ 80 for the past two months. Crude prices fell to $ 79 a barrel following reports that the U.S. was preparing to use its reserves. However, the price of Brent crude rose to $ 82 a barrel as the stockpile figures released to the market came out.

English Summary: Crucial Meeting on December 2 on Crude Oil: Can US, India and China Join hands to Reduce its Price?

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