Will petrol cross Rs 100?
The trade deal which is being discussed in full swing recently between India and America may have to be paid by the pocket of the common Indian. US President Donald Trump has put a strict condition before India under his ‘America First’ policy. The condition is simple, India will have to stop buying oil from Russia and instead increase the purchase of oil from America and Venezuela. If India does not do this, Trump has again warned of imposing 25 percent tariff. Now the biggest question is that if India completely accepts America’s proposal for its energy needs, then how much impact will it have on the prices of petrol and diesel?
Is it so easy to break ties with Russia?
India imports about 85 percent of its total oil requirements from abroad. In the last few years, Russia had become the largest supplier of oil to India. About one-third of India’s total oil imports were coming from Russia alone. But, the equations are now changing rapidly. Experts believe that completely stopping the purchase of oil from Russia would be like chewing iron gram for India, although its reduction has already started.
Reuters report shows that its impact is beginning to be seen on Indian refinery companies. Government companies like Indian Oil (IOC) and HPCL have now started turning towards Venezuela. At the same time, private sector giant Reliance Industries has stopped purchasing oil from Russia and has ordered a large consignment from Venezuela.
American Oil vs Russian Oil, Which is Better?
It is not just about politics, but also about the chemistry of oil. Experts from Russia’s National Energy Security Fund say that changing oil is not as easy as just changing the supplier. The ‘shale oil’ that America sells is very light and is classified as ‘gas condensate’. On the other hand, Russia’s ‘Ural Crude’ is heavier and has higher sulfur content.
The problem is that many of India’s refineries are designed to process this heavy and sulfur-rich Russian oil. If India has to use American oil, it will have to spend heavily and blend it with other grades of oil. That means replacing one oil with another overnight is a technically complex and expensive deal.
How much will it affect your pocket?
Russia has been giving huge discounts on oil to India. Earlier this discount was 7 to 8 dollars per barrel, which has now increased to 11 dollars. That means buying oil from Russia is a very economically beneficial deal for India. At the same time, according to the report of Wall Street Journal, American crude oil will prove to be very expensive for Indian buyers. Vortexa analysts estimate that if Indian refineries switch from Russian oil to American oil, they will have to spend at least $7 more per barrel. Apart from this, the time taken and shipping cost to bring oil from the Gulf Coast of America to India is also much higher than that from Russia.
If the costs of refinery companies increase, it is certain that they will not bear this burden themselves. Its direct effect can be seen by the common man at the petrol pump. Kpler analysts have warned that stopping purchases from Russia will not only be commercially challenging, but could also become a big political headache for India.