The price of crude oil is hanging around $20 barrel currently: Why we are not stocking it?
The best time for common people to do shopping is probably during the Diwali season in India. Well,this time has the best time for countries to buy crude oil as the price is very low. The sharp decline in the price of crude oil in the International market is credited to a price war between Russian and Saudi Arabia and low-demand amid coronavirus lockdown.
Recently, news surfaced that the crude oil price in the US went down to minus $37.63 per barrel. Currently, the crude oil price is hanging around $20 per barrel which is way lower than the average $60-70 per barrel. You would be thinking why India is not importing lots of crude oil now as the price is low and stock it for future use.
Why not stock?
The biggest problem for India is space. We don’t have enough space to keep the oil. We have limited Strategic Petroleum Reserve (SPR) capacities as compared to other developed countries.
India has the capacity of storing just 39 million barrel, so we have limitations when it comes to importing lots of crude oil. India is the third-largest consumer of crude oil in the world. USA has the SPR capacity of 730 MB, China can stock up to 550 MB, Japan can 528 million barrel and South Korea can stock up to 214 MB. India’s Strategic Petroleum Reserve of 39 million tonnes can cover maximum 9 days if a disruption is caused. Japan can cover for 198 days.
The other reason for India for not buying lots of crude oil could be the rising value of the US dollar against rupee. We have to pay the seller in dollars and when the price of crude oil decreases in International market, it impacts the value of the rupee.
From where do we import oil?
India imports a huge chunk of its oil from Saudi Arabia and Iraq. We also used to import lots of crude oil from Iran, but after International sanctions and US’s pressure we are importing very low or none from Iran. UAE, Venezuela, Nigeria and the United States are other few countries from we import the crude oil.
The reason India doesn’t import lots of crude oil from the US even after regular instructions of Donald Trump is that the US is geographically located very far in comparison to middle-eastern counties. The transport cost from importing the US becomes a big problem for India.
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