Government expresses concern over tension in oil producing region
VARANASI/NEW DELHI: Amid growing tensions between the United States and Iran, the oil minister Dharmendra Pradhan On Sunday, he expressed concern about the turmoil in the oil-producing region and said efforts are being made to increase national production and drive the oil economy away.
Oil provides 30% of India's primary energy and gas around 6%. Due to low prospects and national production, India meets 83% of its crude oil requirement through imports. As the third largest oil buyer in the world, India's vulnerability to outbreaks in West Asia occurs when two-thirds of the oil and half of the LNG (gas transported by ships) imported by India pass through the narrow shipping route between Iran and Oman. So, any tension in West Asia pinches consumers in India like world peak oil price raises the prices of domestic pumps. This squeezes household budgets and reduces consumption as consumers become cautious about non-essential spending. Higher oil prices limit the government's ability to offer gifts or spend on social sector schemes.
The rise in oil pushes inflation as government subsidies are exceeded and the cost of industry inputs increases. It damages financial and foreign exchange markets, as the increased demand for dollars to pay for oil imports puts pressure on the rupee and alters the current account deficit. All these depress market sentiments and consumer appetites, which suppress consumption.
A $ 10 increase in world crude oil prices shave GDP of India for up to 30 basis points (one base point equals one hundredth percentage point). That is one reason why, together with efforts to increase national production, the government pursues a renewable energy capacity of 175 GW (gigawatts) by 2022 as a way to reduce dependence on oil.