India warned OPEC of high oil prices shrinking demand
New Delhi: India's dire warning of its demand shrinking by one million barrels per day if oil prices continued their upward march was one of the factors that pushed oil cartel OPEC to raise production to cool prices.
At the meeting of the Organisation of Petroleum Exporting Countries (OPEC) in Vienna last week, Oil Minister Dharmendra Pradhan and his team of officials presented the consumer side to the world's most powerful oil producers.
Pradhan and Indian Oil Corp (IOC) chairman Sanjiv Singh presented an informal paper on the impact of high prices on demand, projecting a scenario of about million barrels per day of demand shrinking by 2025 if oil prices continued to advance towards USD 100 per barrel mark, top sources with direct knowledge of the development said.
The outcome of the OPEC meeting was an additional 1 million barrels per day on top of 32-33 million barrels per day of its current production, a decision that was attributed to consumers from the US to India and China expressing anxiety over rising prices.
India is world's third largest and fastest growing oil consumer. It consumed 204.9 million tonnes of 4 million barrels of oil per day, in 2017-18 fiscal year. Its demand had grown by 5.3 per cent in the fiscal year to March 31, 2018, the highest in major economies of the world.
The International Energy Agency (IEA) had in projection of India's oil demand reaching 458 million tonnes by 2040 had factored in an oil price of USD 83 per barrel by 2025 and USD 130 by 2040, sources said adding India is a price sensitive market and if the oil prices had continued to rise at the rate they were rising in May, the demand would certainly have been impacted.
While the Indian economy would have continued to expand, the need for energy for supporting that would have come from other fossil fuels like LPG and natural gas whose pricing are largely delinked from crude oil, they said.
Both natural gas and LPG could replace auto fuels as well as industrial fuel produced from crude oil, they said, adding renewable energy sources like solar and wind energy are not even being considered for arriving at the shrinkage in demand numbers.
Sources claimed OPEC leadership was taken aback by the numbers thrown by the Indian contingent and they retorted that the one million barrels per day shrinkage in demand was too high a number. Nevertheless, consumer's voice led OPEC to boost output, they said. Oil prices fell on Monday after the OPEC decision taken at Vienna meeting. While Brent crude futures dropped 1.7 per cent to USD 74.25 per barrel, US West Texas Intermediate (WTI) crude futures were down 0.2 per cent at USD 68.42 a barrel.