The International Energy Agency forecast India's consumption to double. India's oil import bill is likely to be triple from 2019 levels to more than $250 billion by 2040. Source- The Hindustan Times
The oil demand in India has been increasing massively. In the last seven years, there was a 25% increase in oil demand in India. This makes India a major oil consumer of the world. Our country has surpassed Japan making it the third-largest oil importer and consumer.
India has relied on the Middle East for long years. But, the country has curbed its reliance on the Middle East significantly in the last few years. The demand fell from 64% of imports in 2016 to less than 60% in 2019.
Last month, the Indian Government asked refiners to fast-track the diversification. It is a measure to reduce the dependence on the Middle East. This was announced a few days later when the OPEC+ said it would maintain production cuts. This sent a message about its clout. It also hinted towards changes in the world's energy maps.
This move was brewing for a few years now. Repeated comments from Oil Minister Dharmendra Pradhan fuelled this decision. In 2015, he said that oil purchases were a 'weapon' for his country.
When the OPEC+s announced the extension of their production cuts into April, the Indian government announced this move. The country's refiners plan on cutting imports from the Kingdom by a quarter in May. This would lead to a drop to 10.8 million barrels from a monthly average of 14.7-14.8 million barrels.
Oil Secretary, Tarun Kapoor told Reuters that India is asking state refiners to negotiate with oil producers. In this way, they can get better deals. But, he refused to comment anything on how they plan to cut on Saudi imports.
He said, "India is a big market so sellers have to be mindful of our country's demands as well. It is necessary to keep the long-term relationship intact."
The International Energy Agency forecast India's consumption to double. India's oil import bill is likely to be triple from 2019 levels to more than $250 billion by 2040.
An Official from the Oil Ministry stated that the OPEC+ cuts have created uncertainty. The refiners will find it challenging to plan out procurement and price risk.
But, it will create opportunities for companies in other countries to pitch in. Companies in America, Africa, Russia can join in to fill the gap.
If India becomes successful with this decision, it would create an example for others. The influence of Saudi Arabia as the major oil supplier would decrease. This will happen as buyers might get an affordable price range. There is also an increase in the use of renewable energy which will affect the oil demands. Ultimately, there is a possibility of alteration of geopolitics and trade routes.