Volatile oil prices upset economies reliant on imports for meeting their needs as they not just have to spend extra on buying the fuel but also import inflation that impacts purchasing powers of their people.
India, the world's third largest oil consuming and importing nation, is hoping that more oil production coming from the western countries like the US and Canada will calm the markets and bring stability in prices, Petroleum Minister Hardeep Singh Puri said Thursday.
Speaking at CII's 12th PSE Summit here, Puri said countries in the western hemisphere are adding more production which may influence oil producers cartel OPEC to also raise output to earn more while the era of fossil fuel lasts.
Volatile oil prices upset economies reliant on imports for meeting their needs as they not just have to spend extra on buying the fuel but also import inflation that impacts purchasing powers of their people.
"Today more production is coming on the global market from the Western Hemisphere. Brazil, Guyana, Canada and the US are adding more production... with more and more oil coming, one expects as a result that the market situation will calm," he said.
This would also at some stage lead to producers who have cut back oil production, to produce more to earn more revenue, he said.
The Organization of the Petroleum Exporting Countries and allies led by Russia, together known as OPEC+, have since late 2022 made a series of deep output cuts to jack up prices and match demand. OPEC+ members are currently cutting output by a total of 5.86 million barrels per day (bpd), or about 5.7 per cent of global demand.
Later talking to reporters, he said the OPEC+ is actively reviewing their decision on production cuts and may decide on the issue in a month or two.
Irrespective of that consuming countries are not likely to face any shortfall as more and more oil is coming on to the market, he said, adding that Brazil is adding 300,000-400,000 bpd of production to their output of 3.3 million bpd. Besides, the US may add another 1 million bpd while Canada and Guyana would also increase output.
"There is more oil available. What we need is stability and predictability so that in the period ahead countries can base their decisions on lines which are predictable. Fluctuations, prices going up and down, that creates uncertainty in the market that is not good for healthy economic decision making," he said. "I think we are on a healthy wicket now."
Stability in oil prices, he said, depends on both availability and geopolitical situation calming.
"If there is trouble in one area, that will result in shippers taking a longer route, thereby increasing the freight and insurance rate. All things being equal, if more oil comes into the market and if the global situation also eases, then we can hope for a more predictable assessment," he said.
At the conference, Puri said availability, affordability and sustainability are three key components of energy supplies.
He said availability is crucial as India cannot afford a situation like in its neighbourhood where prices have either shot through the roof or energy is not physically available for people to consume throughout the day.
"Equally crucial is affordability. There is no point of having energy availability if it is out of the point of scope of access," he said.
Sustainability is also important but fossil fuel will continue to exist for at least the next two decades as the present demand has to be met during the times when clean sources take over, he said. "Percentage of fossil fuel in the overall energy mix will be declining but it will still be there. The percentage of clean energy will rise."