OPEC's Oil Output Cut: Impact on Petrol Prices
OPEC's unexpected decision to reduce oil production by 1.15 million barrels per day is set to increase global oil prices, raising petrol costs and inflation.
Will petrol prices go down? A question that lingers a lot of Indians. But the fall of prices of petrol and other oil seems highly unlikely, although India is procuring major of its oil from Russia, especially now, due the latest output cut as decided by the OPEC nations.
The price of oil is expected to rise from May 2023, following a cut in oil production by OPEC nations.
OPEC nations met for its 48th meeting of Joint Ministerial Monitoring Committee (JMCC) on 3rd of April and decided to reduce oil production by 1.15 million barrels from May till the end of this year, leading to an increase in the price of oil all over the world by 5% in the international market.
This output cut led to an immediate jump in the price of oil to 85.14 and comes after the oil cuts in October for 2 million barrels a day.
The Saudi Energy Ministry quotes the cuts in oil output as an essential to stabilise the price of oil all over the world.
Additionally, the Ministry also added its plans to reduce oil output by 500,000 barrels per day.
Interesting twists between Russia, Japan, and the US
This also follows a series of interesting twists in the international market with Japan buying Russian oil at prices above cap. The official trade record of Japan for the first two months of 2023, shows a purchase of 748,000 barrels for a total of 6.9 billion yen.
This would mean $69.51, which is slightly lower than $70.
Japan is highly dependent on nations for its energy requirements, and this step to purchase oil from Moscow breaking away the $60/barrel cap set in place by US/EU.
Background on Oil scenario
After Russia invaded Ukraine, the European Union (EU), the US, and the UK stopped importing all Russian oil. The Price cap coalition of G7, the EU and Australia had capped the sea-borne Russian oil at a price of $60 per barrel. India and China continued buying Russian oil, with Russia slashing the price of oils in the International market to attract sellers.
Japan goes against the $60 per barrel cap set by the EU to ensure the access of energy from Moscow, and was given an exception from the G7 agreement to stick to the $60 per barrel. Russia accounts for one-tenth of energy requirements of the island nation.
What is India's stance in this situation?
India imported around 1.6 million barrel a day of Russian crude oil in February 2023 and continues being the third largest exporter of oil for Russia. India continued its purchase even after the West imposed sanctions against the purchase of Russian oil.
India, during the G-20 summit dialogue also reassured that it is not interested to breach the commitment it has for the decision taken by EU and US on the price cap and said it will not breach the western sanction on $60 cap.
Additionally, India is also refining Russian oil and selling the refined Russian oil to the US and the EU.
How will this cut in production affect you and me?
Apart from prices soaring up with fueling your vehicles becoming more and more expensive, to an increase in inflation level, thus cost of living, which as a bubble would affect the utility bills; this rise in prices is likely to push people to look out for cheaper and more sustainable alternatives for oil, like electric vehicles (EV’s).
Electric cars sales are forecasted to grow 376,000 by 2030. The rise in FDI investments for the production of EV, more charging points and manufacturing hubs and more importantly, citizens' demand looking for cheaper options amidst soaring prices of crude oil all are reasons that can be attributed for this rise in popularity of electric vehicles.
Cover Image: Reuters
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