India is closely monitoring the global energy market and will release some amount of crude from its strategic petroleum reserves (SPR) if needed to boost supply and ensure price stability, the government said on February 26.
Global crude oil prices rose to $105 a barrel, the highest in almost seven years, after Russia invaded Ukraine on February 24 over supply concerns. Crude did come off the highs but industry watchers expect the upward trend to continue on concerns over likely disruption in supply and in the situation in Ukraine.
“Government of India is closely monitoring global energy markets as well as potential energy supply disruptions as a fall out of the evolving geopolitical situation,” the Centre said in statement.
“With a view to ensuring energy justice for its citizens and for just energy transition towards a net zero future, India stands ready to take appropriate action for ensuring ongoing supplies at stable prices,” it said.
SPR are stockpiles of crude oil held by the government or a private industry for use in times of crisis or an emergency.
The government through Indian Strategic Petroleum Reserve Ltd set up SPRs at three locations in the first phase with a capacity of 5.33 million metric tonnes (MMT) at Visakhapatnam (1.33 MMT), Mangalore (1.50 MMT) and Padur (2.5 MMT).
These three reserves can together meet India’s demand for 9.5 days. The government has also approved building of SPR facilities at two Chandikhol (4 MMT) in Odisha and Padur (2.5 MMT) in Tamil Nadu, which can take care of another 12 days of India’s needs.
“India is also committed to supporting initiatives for releases from strategic petroleum reserves for mitigating market volatility and calming the rise in crude oil prices,” the government said.
A government official told Moneycontrol that the situation was being monitored to assess when and how much crude oil could be released.
Countries release crude oil from these reserves in coordinated moves at times when prices soar due to unusual circumstances.
The Organization of the Petroleum Exporting Countries has kept supply tight by cutting production and the escalating geopolitical tensions have aggravated worries of the situation taking a turn for the worst.
India meets around 85 percent of its fuel demand through imports. Costlier crude means higher import bill that can inflate the current account deficit and widen the fiscal deficit. It will also put push up inflation, increase the cost of inputs for various industries and make transportation expensive.“In such a scenario, India, Thailand and the Philippines are the biggest losers, while Indonesia would be a relative beneficiary,” analysts at Nomura Securities said in a note highlighting the risk Russia-Ukraine conflict poses to Asian countries that rely heavily on oil imports.