Mumbai: Saudi Arabia’s push to restrain oil supply to buoy prices is spurring India to speed up plans to diversify its crude sources and pursue alternative energy, the chairman of one of the nation’s biggest refiners said.
The world’s third-biggest oil importer was already trying to cut its dependence on Middle Eastern crude, with American oil rising from 0.5% of total purchases to 6% over the past five years, Mukesh Kumar Surana, chairman of state-owned Hindustan Petroleum Corp., said in a Bloomberg Television interview.
Indian Oil Minister Dharmendra Pradhan has repeatedly called for OPEC+ to pump more crude to stop prices from rising too high. However, his pleas fell on deaf ears in Riyadh when the alliance, which is dominated by Saudi Arabia and Russia, decided to hold output steady last week. The decision and an attack on an export terminal in the kingdom pushed Brent above $71 a barrel on Monday.
“Higher prices make the future of oil as a commodity in the energy basket more detrimental,” Surana said. “It pushes people to look for more alternative resources in the energy basket,” he said, adding that India would prefer an oil price in the $50 to $60 a barrel range.
It’s looking increasingly unlikely that crude will drop back to those levels. Top banks upgraded their price forecasts following the OPEC+ decision, with Goldman Sachs Group Inc. seeing Brent at $80 a barrel in the third quarter.
Around 86% of Indian oil imports last year were from OPEC+ members, with 19% coming from Saudi Arabia, according to government data. Indian refiners are watching Iran’s possible re-entry into the oil market closely, Surana said.
Higher oil prices are also likely to add more impetus to India’s push for cleaner sources of energy. Prime Minister Narendra Modi said last month that the country is targeting for 40% of its energy needs to come from green sources by 2030.
Brent oil’s surge of around 30% so far this year is already crimping domestic fuel consumption and is threatening India’s recovery from its worst recession since the 1950s. “Higher prices push up inflation and that is not good for the economy,” Surana said.- Bloomberg