India is considered the world’s third-biggest oil importer. 84% of its overall crude needs are imported by the country with over 60% of that which comes from the Middle Eastern countries. These countries are typically cheaper than those from the West. Saudi Arabia, the world’s top exporter leads most of the OPEC+ producers. Last week, Saudi Arabia decided to extend most output curbs into April.
Role of OPEC in The Latest Price Run Up
OPEC plays a part when the oil prices are set around the world. To prevent the large movement in prices, OPEC’s huge role is to stabilize prices in the international markets. Last week, a shock decision was delivered by OPEC and allies including Russia that they will continue with output cuts that have buoyed the market. Even last month as Brent easily passed $60 a barrel, the bullish producer policies came even roughly the annual average level needed for the cartel’s largest producers to balance their budgets well this year.
Will The Price Rise Affect the Global Growth?
Robust and resilient growth is indicated by the rising energy costs on the back of strong demand, while a surge from the crimped supply could weigh on a recovery. Last week, the Bank’s economists wrote, “For context, the global oil burden last rose above its long-term average in 2005, but with the backdrop of strong global growth, economies were able to withstand the impact of higher oil prices until 2007, when global growth momentum was already weakening and yet oil prices shot up rapidly”.
TPT Policy Advocacy & Recommendations
- The soaring oil prices are posing fiscal challenges for India. So, the OPEC+ producers must maintain a reasonable price and take up some necessary steps so that the common people are not affected by any means.
- The fiscal deficits would come under pressure for the emerging economies that rely on the imported energy which in turn could lay the groundwork for inflation.