Even as Russia is offering deep discounts on its crude oil supplies, India is looking at buying more oil from the country which may help ease inflation in India. The development gives Indian refiners better bargaining power with price-setter Saudi Arabia and also reduces India’s dependence on West Asian oil. It will also help control inflation in India as cheaper crude will reduce the petrol and diesel prices in India, thus bringing down the overall inflation.
How Much Crude Oil India Imports?
India’s import bill nearly doubled to $119 billion in the financial year 2021-22. During the previous financial year, India had spent $62.2 billion on oil imports, according to data from the oil ministry’s Petroleum Planning & Analysis Cell (PPAC). The country imported 212.2 million tonnes of crude oil in 2021-22, a significant jump as compared with 196.5 million tonnes a year ago.
After Russian President Vladimir Putin approved a special military operation in Ukraine’s Donbass region on February 24, the Brent crude oil prices hit USD 100 per barrel for the first time since 2014. In the following days, the US’ West Texas Intermediate crude futures even skyrocketed to $130.50 a barrel, its highest since July 2008, before retreating. Brent also hit a high of $139.13, also its highest since July 2008.
From Russia, The country bought just 12 million barrels of the oil in the whole year 2021, which was only 2 per cent of its total imports. India’s own domestic production is more than that. However, it increased after discounts, Russian oil arrivals into India for May were at 740,000 barrels a day, up from 284,000 barrels in April and 34,000 barrels a year earlier, according to data from Kpler.
How Will It Help India?
With over 80 per cent of India’s oil requirement being met through imports, rates in the international market affect the country at a significant level in terms of the import bill. Cheaper oil helps the country in controlling overall inflation.
Brent crude oil prices hit $120 a barrel on Monday after Saudi Arabia raised crude prices for July. Russia offered as much as $35 per barrel discounts on the crude oil prices in April. The Reserve Bank of India has said if the crude price rises 10 per cent above the baseline of USD 100 per barrel, domestic inflation could increase even further. Currently, the retail inflation is already high at 7.79 per cent in April, which is the highest in eight years.
Oil at discounted prices will bring down petrol and diesel prices further which are also running high. India consumed 202.7 million tonnes of petroleum products in the 2022 financial year, up from 194.3 million tonnes in the previous year.
On buying oil from Russia amid boycott by the International community, India’s External Affairs Minister S Jaishankar said, “Buying Russian gas is not funding the war, why it’s only Indian money and fund coming from India and not gas coming to Europe which funds war, let’s be even-handed out here.”