- India, the world’s third-biggest oil consumer, pressed OPEC to move to responsible pricing of oil and gas saying the recent spike in rates are far detached from market fundamentals and are hurting importing nations.
What is Responsible Price?
- Commercial decision reached jointly between a buyer and seller, reflecting a judgment influenced by the economic realities of the marketplace and the relative bargaining powers of the parties.
- Generally, it is high enough to cover the seller’s costs and a reasonable margin, but not high enough for the seller to realize monopolistic profit.
About Organization of Petroleum Exporting Countries (OPEC)
- The Organization of Petroleum Exporting Countries (OPEC) is a group consisting of 12 of the world’s major oil-exporting nations.
- OPEC was founded in 1960 to coordinate the petroleum policies of its members, and to provide member states with technical and economic aid.
- OPEC is a cartel that aims to manage the supply of oil in an effort to set the price of oil on the world market, in order to avoid fluctuations that might affect the economies of both producing and purchasing countries.
- OPEC, which describes itself as a permanent intergovernmental organization, was created in Baghdad in Sept. 1960 by its founding members: Iran, Iraq, Kuwait, Saudi Arabia and Venezuela.
- The headquarters of the organization are in Vienna, Austria, where the OPEC Secretariat, its executive organ, carries out OPEC’s day-to-day business.
- Along with the five founding members, OPEC has 9 additional member countries..
- They are: Qatar, Indonesia , Libya, the United Arab Emirates, Algeria, Nigeria, Ecuador, Gabon and Angola.
- It is notable that some of the world’s largest oil producers, including Russia, China and the United States, are not members of OPEC and pursue their own objectives.
India and OPEC:
- India imports over 83 per cent of its crude oil needs.
- Of the crude oil imported, about 85 per cent of comes from OPEC nations.
- Also, 80 per cent of gas imports come from those countries.
- A combination of crude oil climbing to four-year high and rupee dipping to its lowest level against US dollar has sent retail petrol, diesel and cooking gas (LPG) rates to record high.
- On public pressure, the government cut excise duty on petrol and diesel by Rs 1.50 per litre and asked oil PSUs to subsdise the two fuel by another Re 1. The twin move resulted in retail rates being cut by Rs 2.50 per litre.
- However, the relentless price hike has wiped away all cut benefits on diesel and most on petrol.
- India believes OPEC has a major role in shaping oil prices and availability and the current high oil prices dent the economic development of many countries and threaten already fragile world economic growth.
- Thus, at the 3rd India-OPEC Energy Dialogue, India raised the issue of surging crude prices which is hurting oil importing countries like India.
Highlights of the news
- India pressed OPEC to move to responsible pricing of oil and gas saying the recent spike in rates are far detached from market fundamentals and are hurting importing nations
- India also expressed concerns on global trade practices limiting the affordability of energy.
- OPEC reaffirmed India as an extremely important partner and called for further strengthening India-OPEC relationship.
- The OPEC has assured that it is “committed, capable and willing” to ensure there will be no shortage in the oil market.