The Minister of Petroleum & Natural Gas Shri S. Jaipal Reddy has called upon oil producing and consuming countries to work together to build trust and share market data to establish demand certainty in international oil markets. Addressing a Session on “Oil and World Economy” at 5th OPEC International Seminar in Vienna on 13JUN12, Shri Reddy also advocated instilling confidence among oil producing countries to undertake required investments to produce larger quantities of incremental oil & gas, and reduce the influence of extraneous factors in oil price formulation.
The Minister further emphasized that in an oil-importing country like India, higher international oil prices lead to domestic inflation, increased input costs, an increase in the budget deficit which invariably drives up interest rates and slows down the economic growth. Higher oil prices raise the cost of fertilizers, and hence the cost of food, thus hitting hard the poorest of economies.
Between the Financial Year 2010-11 and 2011-12, India’s annual average cost of imported crude oil increased by 27 dollars per barrel, making India’s oil import bill rise from 100 billion dollars to 140 billion dollars. Further, since we could not pass on the full impact of high international oil prices, we had to shell out subsidies to consumers amounting to 25 billion dollars. It is estimated that a sustained 10 dollar increase in oil prices lead to a 1.5% reduction in the GDP of developing countries. We have seen evidence of this in our own country: India’s GDP grew at 6.9% during the last financial year down from the 8% plus growth rate experienced in the past few years.
India is the world’s fourth largest oil importer.