High oil prices

High oil prices

Part of: Prelims and GS-III – Economy 

Context  India has warned that high oil prices will undermine global economic recovery. 

• It has pushed Saudi Arabia and other OPEC nations to work towards affordable and reliable supplies.
• Petrol and diesel prices have hit record highs across India after continuous price increases since May.

Background 

• Global oil prices crashed to $19 per barrel in April 2020 as demand reduced with most nations imposing lockdowns to control the spread of the novel coronavirus.
• Demand recovered this year as vaccination against the infection revived economies worldwide.
• International benchmark Brent crude has since rallied to $84 per barrel.
• This had made fuel expensive and was instilling fears of inflation.
• While the world had begun the transition towards cleaner fuels such as electric-powered vehicles and hydrogen, most nations were still dependent on oil to fuel their economies. And high oil prices would hurt the recovery in demand.

India and the oil 

• India’s oil import bill had climbed from $8.8 billion in June 2020 quarter to $24 billion this year because of a spike in global oil prices. 
• India imports almost two-thirds of its oil needs from West Asia. 
• India is 85% dependent on imports to meet its oil needs. 
• It is the world’s third-largest energy consumer.

About Organization of the Petroleum Exporting Countries (OPEC)

• The OPEC is a permanent, intergovernmental organization,
• It was created at the Baghdad Conference in 1960, by Iran, Iraq, Kuwait, Saudi Arabia, and Venezuela.
• Aim: It aims to manage the supply of oil in an effort to set the price of oil in the world market, in order to avoid fluctuations that might affect the economies of both producing and purchasing countries.
• It is headquartered in Vienna, Austria.
• OPEC membership is open to any country that is a substantial exporter of oil and which shares the ideals of the organization.
• 14 Member Countries: Iran, Iraq, Kuwait, United Arab Emirates(UAE), Saudi Arabia, Algeria, Libya, Nigeria, Gabon, Equatorial Guinea, Republic of Congo, Angola, Ecuador and Venezuela.