Petroleum minister Hardeep Singh Puri on Friday said the world can’t afford to keep Russia, the second-largest oil producer pumping out 10.5 million barrel a day, off the energy markets.
The minister said it will shoot up prices beyond common man’s reach and also bring in all the attendant economic problems like inflation, among others. Moreover, he noted that there is no sanction on Russian oil but only price caps, which has kept fuel prices under control.
“There are no sanctions on the purchase of Russian crude oil, and the world will face serious consequences if the supplies are disrupted. The world can’t afford to keep Russia off the oil market,” Puri told a select group of editors here on Friday.
Citing the case of Iran and Venezuela, he said India has always complied with sanctions as a responsible member of the international community.
The comments come at a critical time as the US has slapped a 25% penal charges on India’s exports to the US as more than a third of the domestic oil demand of 5.8-6 million barrels per day is met by imports from Russia, averaging 2 million barrels a day in August and reports say the volume has likely increased in the current month. The country meets more than 85% of energy demand from exports.
Speaking with reporters as critical negotiations on trade policies continue between the US and India, Puri said that Russia is the second-largest supplier of crude globally at nearly 10.5 million barrels a day, and warned that the world will face serious consequences if supplies are disrupted.
"Energy is something you cannot do without... If you remove the second-largest producer, you will have to cut consumption. The consequences are pretty serious," Puri said. This is the reason why the world is not imposing sanctions on Russian oil, the career diplomat-turned-politician said.
Puri said there are price caps imposed on buying from Russia and whenever there is any such talk, he asks oil companies under his watch to buy at lower prices. But they have completely professional autonomy from where to source their crude.
He also stated that many countries, including China, Turkey, Japan, and the European Union, purchase oil from Russia. Puri was quick to add that the discounts offered by Russia at this point in time are not that steep.
The minister said a "broad equilibrium" is essential between oil supply and demand, adding he expects crude to continue to trade in a $65-68 a barrel range, going ahead.
Puri hinted that it is in the interest of the US-–the largest oil producer pumping out around 13.5 million barrels per day, with thrust on shale gas-- to ensure that the prices of fossil fuels do not fall a lot and also do not rise beyond a limit.
He explained that a volatile domestic political environment sensitive to stoking inflation and the reliance on shale gas make it pertinent for the US to ensure that the prices do not fall.
State-run oil marketers autonomously decide the source of the crude oil they buy for refining, Puri said, stressing that these companies have professional management and boards as well.
The minister, peeved at the very cheap valuation of oil PSUs—the three refiners (Indian Oil, Hindustan Petroleum and Bharat Petroleum) cumulatively are valued at Rs 4.35 trillion with IOC’s being Rs 2,04,828 crore, BPCL’s at Rs 1,40,850 crore and HPCL’s at Rs 89,761 crore. But this is in stark contrast to the new-age companies like Eternal which has reported huge losses but the market values it t Rs 2.9 trillion and Swiggy at Rs 97,277 crore.
When pointed out that oil PSUs have very low gross refining margins while private player Reliance has very high margins, oil PSU representatives present at the meeting said RIL calculates its GRM from a very complicated metrics while these PSUs calculate only the landed price of crude and the pump prices as GRM metrics.
The minister asked them to follow what others follow in calculating GRMs, which is one of the key metrics that investors look at in an oil refiner.
“These three oil companies have paid Rs 42,000 crore in dividends last fiscal and contributed 8% of GDP and 20% of corporate India’s revenue. Moreover all of them are hugely profitable. Still they are valued so cheap with their collective market cap adding up to only 1% of the total market capitalization. Something has to be done to correct this,” the minister said.
He also said the country is producing more energy than ever before… With the rapidly growing demand for energy, we have has diversified our energy sources. Earlier, we imported from 27 countries; today, we import from 40 countries,” Puri said.
He also said the concerns being aired in some quarter about the ethanol blended petrol saying the concerns are baseless as all the stakeholders in the auto fraternity have found no basis to the worries.