Petrol and diesel prices, already hovering near record levels, are poised to soar further as the head of the International Energy Agency sees robust global demand rapidly outpacing dwindling supply, boosting crude rates.
Indian economy remains vulnerable to oil price fluctuations, which makes it important for the country to diversify sources of supply, use biofuels, and to reduce energy consumption by cars, trucks and factories, Fatih Birol, executive director of Paris-based IEA, told ET in an interview.
Diesel prices rose to a record high this week, while petrol is close to its highest-ever level and the steep depreciation of the Indian rupee has not helped. The rupee has fallen 10% this year hit a record low of Rs 70.82 on Thursday. India imports about 80% of the oil it consumes, which means petrol and diesel would be about Rs 6 per litre cheaper had the rupee held steady this year.
“The coming few months are difficult months. The global oil demand growth is much stronger than the historical averages, led by China, India among other countries. But when we look at the supply side, we see a big problem of Venezuela oil production declining sharply. There’s a free fall,” Birol said.
Global prices would rise unless the oil cartel OPEC, which has cut output to boost price, increases supply significantly, he said.
“If the OPEC alliance countries don’t increase their production significantly in the next months to come, we may see tightening of the global oil markets towards the end of this year. This may well put a pressure on the prices. It is already at $75 per barrel today,” he added.
Brent prices have been firming up on account of lower output in Venezuela and US sanctions that restrict crude oil export from Iran, the third-largest OPEC producer.
Birol said Venezuelan oil production had halved in the last couple of years, an unprecedented event in the history of a major oil producing country, which is exerting further pressure on global supply.
Talking about the trends in the global energy market, Birol said that while the US has emerged as the ‘undisputed’ leader of oil and gas production, India is driving the growth in energy demand globally and both countries are well-positioned to expand energy trade between them.
“I think global oil imports is a vulnerability for the Indian economy, so (they should) not only try to diversify where imports come from, but reducing the growth of oil imports is itself very important. Therefore, improvement in efficiency of trucks, cars, petrochemical industry, is extremely important,” said Birol, who was in the city to deliver the 17th Darbari Seth Lecture organised by The Energy and Resources Institute (TERI).
He said India's decision to increase the use of biofuels in the transportation sector is timely and will be instrumental in reducing the country’s oil imports. “This is the only way, and we hope oil prices don’t go up, and it doesn’t pinch the economic growth of India,” he said.
Source: economictimes.indiatimes.com