Is Oil Bust 2020 An Opportunity for India to Top-Up?

Crude oil prices have internationally fallen below $30 a barrel on fear of an impending global recession and the fears are not unfounded given the fact that there has been economy after economy that have announced lockdown. The fall in crude oil has wrecked global equity market and India is not an exception. Indian Market has also reacted very negatively to the fall in crude oil prices. Now the question arises if India imports 80% of its crude oil requirements than why are the markest reacting so negatively? In this case volatility is the question here. A sharp fall in crude oil prices is seen by markets as some kinds of a disruptor toward the demand supply equilibrium and if there is a sharp fall and prices continue to fall as it is  happening over the last two weeks the equity markets across the world including India have seen this as a sign of coming global economic slowdown which will be very deep rooted and equity markets clearly do not like slowdowns. But this has couple of positives as well. A fall in crude oil price means that the retail prices of petrol and diesel which everyone encounters in the petrol stations have actually come down despite  the fact that government has actually raised excise duty on petrol and diesel and in spite of the rise in taxes on retail prices of petrol and diesel, these prices have fallen at the pump gate level which is primarily because crude oil prices have fallen.  we know petrol and diesel prices are  market determined and are not administered by  the government to the state owned  companies. There is another positive as well. India is building its strategic petroleum oil reserves  like most countries  and by 2020 or maybe early next year if all goes well, India should have a capacity to store 87 days of crude oil reserves in its strategic petroleum reserves. The fall in prices can be an opportunity for India to actually top-up its petroleum crude oil reserves.  India probably could be talking to various crude oil source destinations now to actually leverage this sharp drop in crude prices  and top up strategic petroleum oil reserves.

Sujata Sharma
Batch- 2018-20

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