Oil and fuel have vital importance in the World. One of the most important fuels is petroleum. All countries require and use it but not all produce it. Petroleum exporting countries are known as the Organization of the Petroleum Exporting Countries(OPEC). These countries supply the oil, regulate the prices, and look after the production too. It was formed in September 1960, by five signatories of the Baghdad Pact: the Islamic Republic of Iran, Iraq, Kuwait, Saudi Arabia, and Venezuela. They were to become the Founding Members of the Organization. In 2016, OPEC became OPEC+ since other oil-producing countries joined the cartel of the OPEC group. Currently, there are 15 members of the OPEC+ organization. A rise is seen in the price of petroleum after the worldwide lockdown around March 2020 due to the pandemic.
The Oil Bonds: National Causes of Hyped-up Oil Prices.
In the era of the 2000s, India was developing in all domains, and hence oil demand was high in India.
To keep the fiscal deficit under control, the UPA government, issued oil bonds worth Rs 1.4 lakh crores. These bonds were issued for a term of 20 years. The Government used to provide subsidies on petrol and diesel. Hence, the Oil Marketing Companies (OMCs) were required to sell petrol and diesel in the domestic market below the price at which they might have imported it from other countries. In this way, the cost of fuel was cheaper for the common man in India in the 2000s.
The ruling NDA Government now has to repay the amount with interest in the 2021s. Hence, now that the prices have been hiked up, the percentage of tax has increased.
International Causes of Hyped-up Oil Prices
Just after a month of worldwide lockdown in March 2020, the members of OPEC held a meeting. Due to least or almost next to zero activities in the industry, the oil demand was reduced. And hence, OPEC+ was at a great loss. After a few months, in November 2020, oil demand rose. At the April meeting, two major decisions were taken. First, to minimize oil production for two years, that is, producing fewer units of oil than the actual capacity. The tenure was from April 2020 to April 2022. Secondly, to increase oil prices even on the least demanding days. This agreement is known as the “Output Pact and Fluctuating Oil Price”.
Months passed, lockdown uplifted and the oil demand hiked. Exporting countries covered the loss by exporting oil at a higher price. At last year’s conference, held in April 2022, the Organization was about to increase the tenure that was concluding in April 2022. They decided to extend it for six months, that is, till November 2022. However, the UAE announced that they are not going to be part of any further extension of the output pact. Still, the key players of OPEC+ decided to extend this tenure till August 2022. In August, the UAE and other OPEC+ nations do not reach an agreement to increase production in August, expected relief in the form of lower crude oil prices could be delayed.
Even though India is shifting to EVs and thus reducing its dependency on petroleum, we still require the fuel. Petroleum Minister Dharmendra Pradhan said the high price of crude oil is slowing the economic recovery of developing economies post the pandemic. One of the best ways to stabilize ourselves could be by adapting to the alternative, that is, electric vehicles. Also, limit the use of private vehicles whenever possible, or at least once a week. This can be done to resolve a global cause.
Also, Checkout: What is happening in Pakistan?
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