India will be directly affected
OPEC+ Oil Output: Once again, worrying news is coming regarding the prices of petrol and diesel. OPEC+, the group of world’s largest oil producing countries, has taken a step which is believed to have a direct impact on India. According to a New York Times report, in an important meeting held on Sunday, eight major countries including Russia decided that they will stop their pace of increasing oil production. This decision will come into effect in early 2026. Market experts are considering this as a sign that the supply of crude oil in the international market will remain ‘tight’ in the coming days, which means higher prices. And whenever crude oil becomes expensive, the inflation meter starts rising in India.
What is the decision of OPEC+?
First of all it is important to understand what OPEC+ is all about. This is a very influential alliance of 22 oil producing and exporting countries of the world. In simple language, these are those countries which have large reserves of oil and together they decide how much oil to send to the market. Their main objective is to maintain the prices of crude oil at one level and maintain stability in the global market. When they feel that prices are falling too much, they reduce production and when they feel that prices are rising too much, they increase production.
On Sunday, eight major countries of this group held a meeting. This meeting has taken place at a time when there is a big debate going on all over the world regarding the demand and supply of oil and the prices are continuously going up and down. Therefore, the eyes of big buyers like India were fixed on every decision of this meeting.
Minor relief in December, then break
The decision taken in this meeting is in two parts and the second part is causing great concern for India. OPEC+ issued an official statement saying that in the first phase, i.e. in the coming month of December, oil production will be increased by 137,000 barrels every day. This increase is very minor in terms of market. Analysts believe that this increase is so low that it cannot meet the increasing demand for oil around the world.
But the real worry starts after this. The second part of the decision says that after this slight increase in December, the pace of increasing production will be completely ‘braked’ in the first quarter of next year i.e. 2026 (January, February and March). That means, there will be no additional oil in the market for three months. This is a clear signal to the market that supply will be deliberately limited, so as to prevent prices from falling or to increase them further.
There will be all-round impact on India
Now the question arises that how will this decision of some countries directly affect India? The answer lies in the structure of our economy. India buys more than 85% of its crude oil needs from outside countries, which means we are heavily dependent on imports. When big players like OPEC+ decide to stop production, there is a possibility of shortage of crude oil in the international market. Demand remains the same, but supply decreases, resulting in prices increasing. High prices of crude oil create problems for India on many fronts simultaneously.
- First and direct effect: On your and our pockets. Crude oil becoming expensive means that costs for refineries will increase. Its effect will be directly visible on the prices of petrol, diesel and cooking gas (LPG). Freight transportation will be expensive, due to which the prices of everything from food items to everyday items may increase. That is, this decision can further instigate inflation.
- Second effect: On the country’s treasury. India has to pay in dollars to buy crude oil. When oil becomes expensive, we will have to spend more dollars than before. This will increase our ‘import bill’. The country’s precious foreign exchange reserves (dollar reserves) will decrease rapidly, which is not a good sign for the strength of any economy.
- Third effect: Weakness of rupee. When the demand for dollars suddenly increases in the market to buy oil, the Indian rupee comes under pressure and starts weakening against the dollar. A weak rupee means that we will now have to pay more than before for the same barrel of oil. This is a cycle that makes imports increasingly expensive.
Will the ‘discount’ received from Russia also be less?
There is another screw in this whole matter, which is related to Russia. For some time now, Russia has been providing crude oil to India at a discount i.e. at cheap rates. This has given India some relief from inflation. But some analysts believe that if after this step of OPEC+, the prices of crude oil remain high in the international market and the demand for oil remains strong, then it is possible that Russia may cut the discount given to India. If this happens, it will be a double blow for India. On one hand, international prices will be high and on the other hand, whatever little relief was being provided will also end.