NEW DELHI: Foreign minister S Jaishankar was not wrong when he said on Tuesday high oil prices are breaking India’s back. Despite cheap crude import from Russia, India’s crude oil basket has averaged above $100 a barrel so far this year. As per the Petroleum Planning and Analysis Cell, a body of the Petroleum ministry, India’s crude basket more than doubled in the past 3 years, taking crude prices from an average $45 per barrel in 2020-21 to $104 per barrel in 2022-23 (till September).
India’s crude basket price averaged at $102.97 a barrel in April 2022, $109.51 in May, $116.01 in June, $105.49 in July, $97.40 in August and $91.23 per barrel in September so far. “The price of oil is breaking our back. We are a $2,000 per capita economy. The energy market is under stress due to the Ukraine war and that not just the pricing but the very availability of oil has become an issue,” said Jaishankar.
India is dependent on imports to meet 85% of its oil demand and 55% of its natural gas requirements. It imports majority of crude from the OPEC+ country. The country spent $122 billion on crude oil imports in 2021-22, nearly double that of $62.71 billion in 2020-21. In the first five months of the current financial year, India has already imported $64 billion of crude oil.
Dr DK Srivastava, chief policy advisor, EY India, says an ‘Oil Price Stabilization Fund’ may be established to minimise India’s multidimensional vulnerability to global crude oil shocks. He advises the government to expand and diversify sources of oil and gas imports in order to cut the average price of the Indian crude basket.
Ever since war broke out between Russia and Ukraine, western countries are beckoning India to stop purchasing crude oil from Russia. India’s oil imports from Russia have jumped over 50 times since April and now it makes up for 10% of all crude bought from overseas. Till last year, Iraq (25%), Saudi Arabia (18%) and the UAE (10%) were the top 3 crude suppliers for India. This year till July, Russia with 14% share has become the third biggest supplier to India.