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.

Print Friendly and PDF
blog comments powered by Disqus