What will be the impact of India buying less oil from Saudi Arabia?

Posted on 8th Apr 2021 by rohit kumar

On 2 March, a vessel carrying 1 million tonnes of crude oil from a port of Guyana left for Mundra port in Gujarat. It has to reach its destination by 9-10 April. HPCL and Mittal Energy Limited are the buyers of this crude oil.

 

These fresh imports are not only important because India is buying oil from Guyana for the first time, but it also symbolizes that India wants to reduce its dependence on oil from Saudi Arabia and other Gulf countries.

 

India has asked the government oil refineries and oil companies to reduce oil imports from Saudi Arabia. This cargo coming from Guyana is also an indication that the country's government refineries and private oil companies are following the government's order.

 

In this order, they have been asked to start buying oil from different companies and countries around the world from May to reduce oil dependence on Saudi Arabia and some other Gulf countries.

 

The target of the order of the Government of India in Saudi Arabia. India is the second-largest country to buy oil from Saudi Arabia.

 

Saudi Arabia is the world's largest producer and exporter of oil. On the other hand, India is the third-largest country in the world to import oil and use it.

 

India relies heavily on oil for the continuous development of its economy. That is why it needs not only a large amount of oil but also at cheap prices. If the price of oil increases by two dollars per barrel, then it has a bad effect on India's economy.

 

OPEC, the organization of Saudi Arabia and 23 countries that produce and sell oil, started reducing its production during the epidemic last year when the price of oil fell to less than $ 20 per barrel.

 

Apart from OPEC, Saudi Arabia also reduced its production of oil separately. Due to this, the price of oil had increased to $ 72 per barrel, which has now come down to $ 67 per barrel.

 

India has been demanding oil production from OPEC countries and especially Saudi Arabia since January. On Thursday, these countries of OPEC announced to increase the production of oil from May, but this increase is still not enough for India.

 

India had asked OPEC, the organization of Saudi Arabia and big oil-producing countries, to increase the production of oil, so that the price of oil in international markets is reduced.

 

But Saudi Arabia, which heads the OPEC countries, is hesitant to meet India's demand. That's why Oil and Gas Minister Dharmendra Pradhan has asked the refineries to reduce their dependence on Saudi imports by 36 percent and import oil from other countries.

 

Will this step of India fulfill its objective?

 

It is difficult to say right now. But experts say that it will not be right for India to do so. Maintaining pressure on Saudi Arabia to increase oil production would have been the proper step.

 

According to Bharatiya Janata Party's economic affairs spokesperson Gopal Krishna Agarwal, India is not in a position to talk more because India needs oil. It imports 85 percent of its requirement of oil and related products.

 

But if India stops buying Saudi Arabian oil, it may have to face two problems in other countries from which it may have to import oil. First is that if you buy oil from companies of America or Western countries, then you will have to deal in dollars and the conditions will also not be in favor of India.

 

The second problem will be that if you buy oil from Russia, then the quality will not be right.

 

The truth is that India depends heavily on the oil of Saudi Arabia and other Gulf countries. India supplies 60 percent of its total oil imports from Gulf countries such as Saudi Arabia, Iraq, and the United Arab Emirates.

 

The consumption of oil in India is going to double in the next 20 years and then it will become the largest oil-consuming country in the world. Therefore, it will continue to need to import oil without any interruption.

 

Where else would you buy oil if not Saudi?

Which countries can India import oil to reduce the import of oil from Saudi Arabia?

 

Experts say that there is no dearth of oil-exporting countries and big companies. For example, Russia is the largest oil seller outside OPEC countries. But the quality is the quality of oil.

 

Till recently, India used to buy oil from Iran and Venezuela on easy terms, but after US sanctions, India no longer imports oil from these two countries. Iran used to sell oil to India on very easy terms.

 

Gopal Krishna Agarwal hopes that there will be a possibility of importing oil from Iran in three to four months.

 

Remember that recently Iran and China signed a major agreement for 25 years. Under this, Iran will continuously supply crude oil to China and in return, China will invest heavily in Iran.

 

According to the New York Times newspaper, these investments can be up to $ 400 billion.

 

Will India get oil at a cheaper price?

Experts say that the price of crude oil in international markets is likely to decline from May, as OPEC countries have recently decided to increase the production of oil.

 

But he said that it will directly affect the common consumers of the country, it is difficult to say.

 

According to energy sector expert Vivek Jain in Mumbai, "If the price of oil falls in the international market and the Center and the states do not increase the excise duty, then the prices of petrol and diesel reaching the general consumers will fall."

 

After all, what makes India cheaper to buy oil than Saudi Arabia, while expensive than countries like America or Guyana?

 

Experts say that Saudi oil is cheaper for India because the distance between the two countries is very less. But due to the distance in importing oil from countries like America or Guyana, its transportation is more, which will directly affect the petrol and diesel available at the petrol pump. That is why they say that this step of India will be like a self-goal.

 

Effect on relationships with Saudi Arabia?

 

Will this step of India does not affect the deep ties with Saudi Arabia?

 

Since Prime Minister Narendra Modi came to power in 2014, closeness between India and Saudi Arabia has increased and relations have deepened.

 

Saudi Arabia has put forward a firm plan to invest $ 100 billion in India. In return, India will help Saudi Arabia in the field of defense and security. But in recent months, relations between the two countries regarding oil have soured.

 

Recently, India's Oil and Gas Minister Dharmendra Pradhan objected to the statement of Saudi Arabian Oil Minister Abdul Aziz bin Salman, in which he said that India would reduce the price of crude oil. Use the reserve, which he bought last year, amidst the falling prices of oil and accumulated it.

 

Dharmendra Pradhan commented on this statement of the oil minister of Saudi Arabia, saying that this statement is not diplomatically correct.

 

Despite this, the relationship is still strong. In the last six years, Prime Minister Narendra Modi has visited Saudi Arabia twice, since then, the status of Saudi Arabia has not ceased to be in the eyes of India as an oil-selling country. Both countries are now cooperating in many fields.