India’s oil refiners — both state-owned and private — are coming together to look at “common goals” as the galloping crude prices and the fresh bout of sanctions by the US on Iran from November throws up challenges for Asia’s third biggest economy and the world’s third biggest oil consumer.

At a meeting on September 15, refiners looked at the possibilities of protecting India against the surge in global crude prices and alternative ways to reduce the overall consumption of crude, including tapping into bio-fuels in a much bigger way, improve overall efficiencies and alternative sources of fuel so that the country’s dependence on OPEC-related crude is reduced, at least two officials who attended the meeting said.

“We met for the first time to see how all of us together can impact pricing and consumption of crude. Together, we have almost the second highest growth in consumption of oil after China, ahead of Europe and maybe marginally ahead of the US. So, we were discussing why is it that OPEC countries should not be looking at us seriously and why the Asian premium exists for India and China,” one of the officials, an executive with a state-owned oil marketing company, said.

Special price needed

The refiners felt that “OPEC should seriously consider a special price for India”.

India should be looked at from the overall geopolitical economics of crude pricing. Our consumption is so much that producers should take notice. They should seriously consider a special price for India, the official said.

“If you look at the prices charged by OPEC for Eastern Asia and Europe and US, they are different. The difference ranges from $2 to as much as $5 per barrel. So, we are saying why are you asking us to sponsor price for western Europe or US,” he said.

OPEC is the Organisation of Petroleum Exporting Countries. On Monday, the benchmark Brent crude surged above $83 per barrel.

India imported 220 million tonnes (mt) of crude in the year to March 2018, 3 per cent more than the previous year. India’s oil import bill, though, rose 25 per cent in FY18 to $88 billion from $70 billion in FY17 due to higher crude prices.

Every dollar increase in oil prices will push up India’s import bill by around ₹10,700 crore on an annual basis.

Inventory reduction

Inventory reduction was one of the things that was discussed at the meeting, a second official who participated, said. “If we are together able to bring an inventory reduction that much quantity will be reduced from our foreign exchange dependence and also to that extent it impacts oil demand. Because, at some point of time, OPEC will also need to be worried that if the prices just go up in countries like India and China and if the demand goes down, they may have the oil, but nobody will buy it,” he said.

“Fundamentally, we all felt that a lot of these things are driven not really by production and demand. World oil prices are moving more on pronouncements and statements by the US and Iran than by what exactly is dictated by demand. We were having a meeting to see what is it that we can do together as a refining industry to look at common goals,” he said, adding that the government must continue engaging with the US to get Iranian crude into India.

“Iranian oil is good for India. It comes on short haul, they give some rate concessions and all of us have significant value for that. While all these engagements happen, the Indian refiners are not worried because they will find a way to get alternative sources of crude,” the second official said.

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