India plans to use the 5 million barrels of crude oil from its emergency stockpile. To reduce the prices, India along with the US, Japan, and other major economies has decided to use the emergency stock of crude oil.
Earlier, the United States requested the major oil consumers of the world to use their emergency stock of crude oil. The countries that are major consumers of crude oil in the world include China, India, and Japan. The US requested to release the stockpile in a coordinated effort to reduce the pressure on global energy prices.
Further, the Organization of the Petroleum Exporting Countries (OPEC) is facing pressure to increase its production. Several countries including the allies of the OPEC requested the same amidst the rising prices of crude oil.
The emergency stockpile of crude oil in strategic reserves
There are about 38 million barrels of crude oil in underground caverns at three locations on the east and west coast.
Among these, 5 million barrels will be released within 7-10 days, as stated by the officials. Further, Mangalore Refinery and Petrochemicals Ltd (MRPL) and Hindustan Petroleum Corp Ltd (HPCL) will buy those stocks. Moreover, these two firms’ pipelines connect to these strategic reserves.
India plans to release about 5 million barrels of crude oil from strategic reserves. It will be released in 7 days. Some other countries are also likely to come with such measures to cool off crude oil prices in International Market: Sources
— ANI (@ANI) November 23, 2021
Further, the officials said “We may look at releasing more reserves later. A formal announcement will commence later in the day.”
India has 5.33 million tonnes of underground crude oil storage at two places on the east and the west coast. 1.33 million tonnes of storage is at Visakhapatnam in Andhra Pradesh, and 1.5 million tonnes at Mangaluru, and 2.5 million tonnes at Padur (both in Karnataka).
The rise in oil prices lead to unwanted inflation in India
India is the world’s third-largest oil consumer and importing nation. In addition, the relentless rise in international oil prices has severely impacted it. Since the US move, global oil prices are on the decline. Brent crude was trading at USD 78.72 per barrel, down from USD 81.24 a barrel 10-days back. On October 26, it had hit a multi-year high of $86.40.
Secondly, just like the US, the Indian government feels that high prices of oil further lead to inflation. This is affecting the already recovering economy that the COVID hit last year.