Mumbai: Several oil producing OPEC countries including Saudi Arabia, Iraq and Kuwait suddenly announced cuts in oil production. Saudi Arabia will reduce oil production by half a million barrels per day.
Iraq will reduce production by 2 lakh 11 thousand barrels. Crude oil prices increased in the international market after the announcement of reduction in production.
However, there is a common perception that the government will not significantly hike the prices of petro products in view of elections in many states and Lok Sabha elections.
India's economy is based on oil only.
India is the third largest oil consumer in the world. India is the biggest market after America and China.
It is obvious that if the production of oil decreases and if the price of oil increases, then it will have a direct impact on the Indian economy. Because India's economy is based on oil only.
India has strategic relations with Russia and Saudi Arabia, so even if oil prices increase, India will continue to get oil.
India is buying 27% of oil from Russia
India used to buy only two percent of its oil from Russia before the Ukraine war, but now India is buying 27 percent of its oil from Russia.
Russia is a major exporter and producer of oil. Russia needed a new market after Western sanctions and India needed cheap oil. In such a situation, the business of oil is beneficial for both the countries.
India got cheap oil compared to the international market. Apart from this, Russia transported this oil to the ports of India. India also got relief from Russia in making payment. The Indian economy was struggling with rising oil prices. India has definitely got relief from the cheap oil received from Russia.
India buys Russian oil bypassing Western criticism
India has bought Russian oil bypassing the criticism of western countries, because it is the need of India. However, the big question before India is that how long it will continue to get oil from Russia at cheap rates.
As Russia's market will expand, concession given to India will decrease
Apart from India, many other countries of the world are buying Russian oil. 80% of the world's countries import oil. Countries like Turkey, Pakistan and Morocco are now buying oil from Russia. In such a situation, as the market of Russia expands, the exemption given to India will decrease.
Oil prices depend on many factors
It is difficult to say what will be the price of oil in future. Oil prices depend on many factors. In such a situation, the question arises that if the production is reduced, can the price of oil increase significantly in the next few months.
India will be in trouble if oil reaches $90
It can be estimated that during the next three months, oil will remain between 80 to 90 dollars per barrel. If oil reaches 90 dollars, then an economy like India faces trouble but it is able to bear it. The problem can come when the oil goes beyond this.
On the other hand, oil producers like Saudi Arabia argue that it is not profitable for them to sell crude oil below the rate of $ 80 per barrel, and therefore they reduce oil production to balance demand and supply.
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