The oil opportunity for India – editorials
The price of Texas oil futures fell below zero dollars a barrel on Monday. In theory, and for a fleeting moment, an empty barrel of crude oil was worth more than a full one. This was a symbolic milestone, a consequence of the lack of storage and fire sales in the quarter rather than a stable market situation. Oil price futures have rebounded, but only to its still absurdly low band of $ 20 to $ 25 a barrel. The price of Brent crude, the one relevant to India, continues at the low $ 20. All this reflects the enormous mismatch between global supply and demand. There was already a surplus of oil before the coronavirus pandemic. After the outbreak and continued economic decline, the world is awash in black gold. Recent oil production cuts of 15 million barrels announced by various countries proved to be harmless in the face of falling demand for 30 million barrels. The brief drop in negative Texas oil prices was a symptom that caught the headlines of the current surplus problem. There have been other signs: the record 160 million barrels of oil stored in stationary tankers, and countries like Nigeria cannot sell sweet light crude even at $ 11. Natural gas prices have also followed a slippery slope.
As one of the world’s largest importers and a country repeatedly kneeling by spikes in crude oil, India has always been happy when prices have plummeted. But it has moved beyond the days when it looked to oil solely in terms of how much currency exchange it could save. Today, you should look at how you can quickly improve your strategic reserves to take advantage of falling prices; China, for example, is doing exactly that. You should guarantee future supplies (this is a good time to enter into long-term contracts). And finally, you must also judge how the current oil crisis will affect, for better or worse, your long-term energy strategy.
New Delhi should keep a firm eye on its long-standing goals of promoting solar and wind power, shifting more base energy to natural gas, and shutting down its most polluting coal-fired power plants, but even the higher cost is unlikely. Cash from these will be able to match oil prices in the short and perhaps even the medium term.