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Why Is India in a Rush to Brag about Oil Imports from America?

Discussion in 'World Economy' started by InfoWarrior, Oct 27, 2017.

  1. InfoWarrior

    InfoWarrior Lieutenant FULL MEMBER

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    Rajeev Sharma
    October 10, 2017, 9:35 am October 10, 2017, 9:35 am


    Oil minister Dharmendra Pradhan met the chief of the 14-member cartel of oil producing nations, the Organization of the Petroleum Exporting Countries (OPEC), in New Delhi on Sunday, 8 October and told him that New Delhi has other buying options.

    Pradhan's hard talk with OPEC Secretary General Sanusi Mohammad Barkindo came on the heels of the first-ever supply of crude oil from the United States to India which
    was $2 a barrel cheaper than Dubai crude.

    Political Posturing on Oil Imports
    However, the minister should have known better. If Pradhan’s “hard talk” with the OPEC chief was meant to be just political posturing it’s another matter. But the hard fact is that the first-ever American crude oil supply to India is neither a game-changer nor a substitute for the current mechanism of Indian oil imports.

    The bigger picture is much more complex and convoluted – and vastly different. It’s virtually a chess game involving the world’s big powers like the US, Russia, OPEC and many others. Read on!

    During this meeting, Pradhan’s team told the OPEC delegation that “responsible pricing” was important for India’s socioeconomic development. While highlighting India’s policy of giving top priority to diversifying its crude oil supply sources and tapping new supply sources, Pradhan’s team also highlighted the recent supply of 1.69
    million barrels of crude oil (two lakh tonnes) from the US to India.

    [​IMG]
    Petroleum Minister Dharmendra Pradhan tells OPEC Chief that India has other buying options.
    Banking on American Crude Oil Supply
    Clearly, the Modi government is gung-ho about the new oil route from America, and is trying to leverage this first aid supply to a cartel like OPEC which accounts for 86 percent of crude oil, 75 percent of gas and 95 percent of liquefied petroleum gas (LPG) imported by India.

    The first-ever American crude oil supply to India, though a welcome move and potential game-changer in foreseeable future, is as of now nothing more than a gimmick.

    An example of this is the first-ever visit of Saudi King Salman bin Abdulaziz Al Saud to Russia a few days ago. One of the objectives of the Saudi King's unprecedented visit to the world’s largest oil producer was to ensure that oil-producing countries close ranks and cut down production so that oil prices could go through the roof again.

    India imported 214 million tons of crude oil in 2016-2017 fiscal year, a jump of 5.4 percent from a year earlier.
    Himendra Kumar, an international oil trade analyst, says the US wants to distort India's crude oil supplies from Iran and to an extent, from Saudi Arabia.

    Killing Two Birds with One Stone
    It’s a much larger American strategic game wherein America wants to kill several birds with one stone: Iran, Russia and Saudi Arabia, to name a few.

    The Trump administration wants to isolate Iran as it views the Islamic State as an axis of evil and wants to cut its access to the US dollar to the farthest extent possible. The crude oil trade is in US Dollar.

    Similarly, the US wants to exert further pressure on Saudi Arabia, through a concerted effort to keep international oil prices well below $60 a barrel so that its budgetary deficit widens to unmanageable proportions.
    Currently, Saudi Arabia is dipping into its rich but fast depleting Sovereign Wealth Fund to meet its budgetary shortfall, but it is expected that the country will exhaust this contingency fund within next three years. At their current level of spending, Saudi Arabia’s budget deficit is bound to spiral out of control.

    The Saudis need oil well above $80 a barrel to balance their budget. At some point, depending upon Saudi Arabia’s vulnerability, the Americans would make an overt move to take control of Saudi Aramco (state-run oil company).

    At the Expense of Riling Iran
    For India, theoretically, the addition of the US as a crude supplier widens the pool of suppliers and gives a fillip to its energy security. However, it comes at the cost of a big and time-tested supplier turning hostile towards India.

    At the US’ behest, India has significantly trimmed its oil supplies from Iran in recent months, which resulted in Iran withdrawing some concessions to Indian refiners.

    India received its first shipment from the US of 1.69 million barrels this week and its current order book is of the size of 1 million tonnes or 8.45 million barrels, which would arrive in due course.
    “The oil the US has chosen to export to India is of the sour variety, not the expensive shale oil,” says Kumar.

    That’s all very well, given that the Indian refineries are configured to process the Middle East sour oil grades. The US has turned a net exporter of crude oil and the commodity’s largest producer in the world on the back of a shale oil revolution made possible by the pioneering horizontal drilling and hydraulic fracturing technology, popularly known as fracking.Himendra Kumar, Analyst, International oil trade
    Oil Needs of the US
    An important fact which must not be overlooked is that although the US has significantly cut down its oil imports from the Middle East, it still needs to import significantly high quantities of crude oil to meet its burgeoning needs.

    The US currently produces about 9.3 million barrels of oil per day, while its domestic consumption for oil and oil equivalent cumulatively is more than 19.5 million barrels per day.

    Now, the obvious question is how can India afford to cut its umbilical chord of oil imports from the OPEC on the strength of American oil supplies to India when the US itself continues to be dependent on the OPEC?

    Also Read: 54,000 Petrol Pumps to Go on 24-Hour Strike on 13 October

    (Rajeev Sharma is a strategic analyst and columnist who tweets @Kishkindha. This is an opinion piece and the views expressed above are the author’s own. The Quint neither endorses nor is responsible for the same.)

    (This Diwali, make the right kind of noise and send us a video saying #PatakhaHayeHaye to fit@thequint.com. Join the FIT campaign to fight pollution.)

    TheQuint
    Stay updated with News on BloombergQuint.

    https://www.bloombergquint.com/opinion/2017/10/10/us-crude-oil-export-to-india-not-a-game-changer
     
  2. InfoWarrior

    InfoWarrior Lieutenant FULL MEMBER

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    US oil arrives in India as Washington tries to edge out Iran's influence
    by John Siciliano | Oct 5, 2017, 12:37 PM


    Energy Secretary Rick Perry announced Thursday that the first-ever cargo of U.S. crude oil has arrived in India, reaffirming the goals of the president's energy dominance agenda.

    Perry said the new "collaborative work" on energy between the two countries will increase jobs, economic stability, and national security.

    "This event represents the growing energy partnership between the U.S. and India, and I look forward to exploring new opportunities to expand the role of reliable, responsible, and efficient energy sources with our allies," said Perry.

    The first shipment arrived in India on Oct. 2. Perry said the flow of oil to the country was the result of Indian Prime Minister Narendra Modi's visit with President Trump. Soon after that visit, "Indian companies ramped up purchases of U.S. crude," the Energy Department said Thursday.

    The Energy Department said to expect shipments to increase from ports in Louisiana and Texas.

    The president's energy dominance agenda calls for producing more oil and natural gas in the U.S., while also shipping more of it abroad.

    India in particular offers a geopolitical dimension to the oil shipments because it's a huge market for oil and a prime recipient of crude from Iran. Last week, Interior Secretary Ryan Zinke said the energy dominance agenda would consider using U.S. oil to supplant Iran's oil wealth in order to block its funding of terrorism and nuclear weapons development.

    "Iran is a grave threat. And it is better to have options to address Iran economically and not just militarily," he said.

    Zinke said U.S. "economic leverage" would work to "supplant every drop of crude that Iran produces ... and energy dominance is part of that."
    http://www.washingtonexaminer.com/u...s-to-edge-out-irans-influence/article/2636634
     
  3. sunstersun

    sunstersun Lieutenant IDF NewBie

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    Indians like the word game changer.
     
  4. WhyCry

    WhyCry Reaper Love IDF NewBie

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    This is a just a counterbalance after Iran dropped the payment from 90 to 60 days. Iran is a OPEC member and apply the "Asian Premium" on the crude.

    This is basically a blackmail option which Saudi Arabia by increasing production to drive out shale production. But now they are running around for lowering production :facepalm:. Russia also cannot reduce production by large since they have huge budget deficits and ruble has been losing value (from 32ish in 2014 to 77ish in 2016 to stabilize at 60ish now).
     
  5. The enlightened

    The enlightened Lieutenant FULL MEMBER

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    We bought it because it was cheap enough and to balance the trade surplus that we have with USA. Nothing to do with Iran, OPEC etc.
     
    Zer0reZ likes this.
  6. sunstersun

    sunstersun Lieutenant IDF NewBie

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    I like it, it's an efficient option to get Trump to shut up about trade balances.
     
    InfoWarrior likes this.
  7. randomradio

    randomradio Colonel REGISTERED

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    OPEC wants to increase prices phenomenally by controlling supply. And the US and India have vested interests to keep prices at moderate levels. The best way to do it is to increase US oil production, and India can help buy some of that production. The $2 discount on each barrel send this message clearly to OPEC. Hopefully it is sustainable. The numbers right now is just a blip in India's total oil imports.

    http://www.thehindubusinessline.com...rude-pricing-to-opec-chief/article9893190.ece

    Shale used to be profitable at $60, now it is at $40. And it will continue to reduce. This will make Indian shale oil reserves competitive as well.
     
    proud_indian and Bloom 17 like this.
  8. sunstersun

    sunstersun Lieutenant IDF NewBie

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    OPEC won't have significant impact on the market within 5 years. Some companies have speculated that the US has more oil reserves than SA or Russia.

    US shale gas has single handily changed the market permanently. + dat model 3 tesla baby.
     
  9. randomradio

    randomradio Colonel REGISTERED

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    Prices increasing is subject to how quickly the US ramps up production.

    Electric vehicles will make a major impact only after a decade or so. Tesla will have to make cheaper cars than the Model 3.
     
  10. sunstersun

    sunstersun Lieutenant IDF NewBie

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    I think US shale producers are insanely resistant. I remember them pumping at 40$ pretty consistently. Took a long while before they started lowering production. Benefits of capitalism i guess.

    Da Musk Grand plan wants electric cars down to 10k-15k by 2025, model 3 is ardy 35k which is pretty good.

    but yeah I agree. at least a decade before electric cars hit oil prices hard.
     
    Last edited: Oct 28, 2017
  11. InfoWarrior

    InfoWarrior Lieutenant FULL MEMBER

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    So basically its a trade war between OPEC and rest of us. I think Electric vehicles are the only solution to tyranny of OPEC
     
  12. InfoWarrior

    InfoWarrior Lieutenant FULL MEMBER

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    Not just US-India but most of NATO and china has vested interests. Venezuela has largest reserves of oil, recently US tried to topple communist regime of Maduro in Venezuela. US attempt was a flop, and it has backfired.

    US hits Nicolás Maduro with sanctions after Venezuela's 'sham' election
    https://www.theguardian.com/world/2017/jul/31/us-venezuela-sanctions-nicolas-maduro
     
  13. InfoWarrior

    InfoWarrior Lieutenant FULL MEMBER

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    Electric Vehicles are the only long time solution. Shale gas seems more like a gimmick propaganda, too much environmental risk.
     
  14. InfoWarrior

    InfoWarrior Lieutenant FULL MEMBER

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    In case of India, we need a Hybrid vehicle for around 3.5 lakhs. More like a bigger TATA Nano with Electric motor and Battery
     
  15. Satendra kumar

    Satendra kumar FULL MEMBER

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    Energy security is always question,the availability,the cost and the supply,as India buys and sell from different countries with it's abundance resources,the cost,supply and timetable are always accounted.
     

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