Explained: Why are India, other countries releasing oil from strategic reserves?

What is the news?

India is going to release 5 million barrels of oil from its strategic reserves as part of a coordinated challenge led by the US against the OPEC+ producers’ cartel’s move to curb output.

This would be the first instance of India using strategic reserves to influence international prices.

Why are these countries releasing oil from strategic reserves?

It is part of a concerted effort to counter upward price of crude oil from OPEC+, led by Russia, to decide production quotas — keeping supply below demand.

How will this step affect crude oil prices?

Coordinated release of reserves by large oil consuming countries would bring down the crude prices.

Saudi and Russia are the largest oil producers in the OPEC+ group. They indicated plans to gradually increase production in the light of releases from strategic reserves.

How have high crude oil prices impacted India?

Consumers paid record high prices for petrol and diesel across the country. Prices are significantly higher than those prior to 2021.

What are India’s strategic petroleum reserves, and why are they needed?

India’s strategic reserves aims to build an emergency stockpile of crude oil. These are created on the lines of the reserves that the US and its Western allies set up after the first oil crisis of 1973-74.

-These facilities can provide for about 9.5 days of India’s crude oil requirements based on 2019-20 consumption levels.

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Need – India imports about 85% of its crude oil requirements. The International Energy Agency (IEA) recommends that all countries hold crude oil stocks worth 90 days of imports.

Source: This post is based on the article “Explained: Why are India, other countries releasing oil from strategic reserves?” published in Indian Express on 26th November 2021.