context:- post COVID-19 effect, India needs to address the problem of petroleum supply security.
Oil war & Death of knell of Opec: -
- The implication of the decision of Saudi Arabia & Russia:
(i) when the whole world is Under crisis, Saudi wants to catch hold of the oil market by its share.
(ii) Russia wants to remove US shale oil Industry
- these would result in knell of OPEC.
Reasons for the Decline in oil price?
- currently, it is 30$ per barrel which was = 60$ as average in 2019.
- why such volatility?
a) Saudi ⇒ Increased Production by 9.8 Mbd Additional to that of earlier 12 mbd.
b) Two Importance consumer sector, Transport and
Industries are lockdown.
- This can result in fall of oil consumption by 25m bd
(which is total Prod of oped).
- Thus Saudi & Russia will achieve their objectives.
Implication on OPEC countries
(i) Budgetary Crisis:
- OPEC countries would end up at the balance sheet crisis.
eg: these producers are gut countries and have foreign Reserves in form of sovereign currency.
- So to tackle they have to cut subsidies, raise taxes.
- India → needs to work on building its own oil supply plans with likehood of OPEC.
(ii) Reconfiguration of the oil Industry will take place.