This week, the recent decrease in oil prices by over USD 4 a barrel in the international market is expected to benefit India.
This decline is a result of the Organization of the Petroleum Exporting Countries (OPEC+) cartel’s decision to increase production and a rise in US crude stockpiles.
As a result, August’s benchmark Brent oil futures dropped to USD 77.50, while July crude oil futures on WTI (West Texas Intermediate) reached USD 73.22, marking the first time oil prices fell below USD 80 a barrel since February 7.
India, which imports around 85% of its crude oil, stands to gain from the decrease in oil prices as it will reduce the country’s import bill.
This, in turn, will lower the current account deficit and strengthen the Indian rupee. The decline in oil prices will also lead to a reduction in petrol, diesel, and LPG prices in the domestic market, consequently easing inflation.
Furthermore, India has reduced its oil import bill by purchasing Russian crude at discounted prices despite Western pressures related to the conflict in Ukraine.
The country’s close ties with Russia have positioned it as the largest purchaser of Russia’s seaborne oil, replacing Iraq and Saudi Arabia as the top supplier of crude oil.
These strategic purchases resulted in substantial savings, with an approximate USD 7.9 billion reduction in the oil import bill during the first 11 months of the fiscal year 2022-23.
Additionally, the significant increase in the volume of crude petroleum imported from Russia further highlights the impact of India’s oil import strategy.
This shift has provided India with cost savings and contributed to keeping oil prices in the world market at reasonable levels, benefiting other importing countries as well.
In volume terms, the share of crude petroleum imported from Russia surged to 36% in 11 months, up from 2% in the previous year, while imports from West Asian countries declined.
The discounts on Russian oil have substantially contributed to the reduction in India’s oil import bill.
