OPEC Current Affairs
India is coordinating with China and other Asian countries to raise voice against Asian premium charged by Organisation of the Petroleum Exporting Countries (OPEC). Indian Oil Corporation Chairman Sanjiv Singh will coordinate with head of China National Petroleum Corporation (CNPC) to chalk out strategy that will result in getting better price from OPEC countries.
Asian Premium is extra charge being collected by OPEC countries from Asian countries when selling oil in comparison to western countries. For example, production cost of one barrel of crude oil is Rs. 100 in OPEC countries. These countries want to make profit of Rs. 100 so they ideally should sell one barrel for Rs. 200. But under Asian Premium pricing mechanism, OPEC countries gives discriminatory treatment to Asian countries (though being largest importer of OPEC produced oil) by charging them Rs. 220 per barrel and on other side giving discount to western countries by selling them at Rs.180 or below one 180 per barrel. The discriminatory Asian Premium is mainly used by OPEC countries to subsidised western buyers at cost of Asian buyers
India sources about 86% of crude oil, 75% of natural gas and 95% of LPG from OPEC member nations. It has been voicing its dissent against this discriminatory practice and has called for replacing Asian Premium with Asian Discount (dividend). India has emphasized implementation of ‘Responsible and Reasonable Pricing’ by oil producing countries, given importance of Asian markets for OPEC, particularly fast growing energy markets in the region as they are reliable and continued customer. The removal of discriminatory Asian Premium will allow poor Asian countries including India to provide energy to people who have been deprived of energy so far.
Organization of the Petroleum Exporting Countries (OPEC)
The OPEC is an intergovernmental organization (or cartel) of 14 oil-exporting developing nations that coordinates and unifies the petroleum policies of its member countries. It was established in 1960 in Baghdad, Iraq by the first five members. Its headquarters are in Vienna, Austria.
OPEC Members are Iran, Iraq, Saudi Arabia (de facto leader of OPEC), Kuwait, Qatar, United Arab Emirates (from Asia and Middle East); Algeria, Angola, Libya, Nigeria, Equatorial Guinea and Gabon (from Africa); Ecuador and Venezuela (from South/Latin America).
As of 2015, these 14 OPEC member countries accounted for an estimated 43% of global oil production and 73% of the “proven” world’s oil reserves. Two-thirds of OPEC’s oil production and reserves are in its six Middle Eastern (west Asian) countries that surround the oil-rich Persian Gulf.
The Organisation of Petroleum Exporting Countries (OPEC) reached an agreement to cut oil production for the first time since 2008 after an informal meeting in Algiers, Algeria.
It was decided that OPEC would reduce output to a range of 32.5 to 33.0 million barrels per day (bpd) from its current output at 33.24 million bpd.
However, how much each country will or reduce its output will be decided at the OPEC’s next formal meeting scheduled in November 2016. In this meeting, special invitation will be sent to Russia (non-OPEC member) to join cuts in production.
Impact on India
- India, being the 3rd largest importer of crude oil imports 85% of total oil and 95% of natural gas from OPEC nations.
- In recent time due to cheaper oil prices in international market due to overproduction and non-coordination among OPEC countries Indian economy had immensely benefited.
- However, this decision may result in spike in oil prices which can have major implications for the India’s current account deficit and overall economy in general.
- In recent times, lower oil prices kept the Indian economy on the shining path and managed to keep inflation under control making it fastest growing economy in G20 countries.
About Organization of the Petroleum Exporting Countries (OPEC)
- The OPEC is an intergovernmental organization of 14 oil-exporting developing nations that coordinates and unifies the petroleum policies of its member countries.
- Established: 1960 in Baghdad, Iraq by the first five members.
- Headquarters: Vienna, Austria.
- OPEC Members: Algeria, Angola, Libya, Nigeria and Gabon (from Africa); Indonesia, Iran, Iraq, Saudi Arabia (the de facto leader) Kuwait, Qatar, United Arab Emirates (from Asia); Ecuador and Venezuela (from Latin America).
- As of 2015, these 14 OPEC member countries accounted for an estimated 43% of global oil production and 73% of the world’s oil reserves.
- Two-thirds of OPEC’s oil production and reserves are in its six Middle Eastern (west Asian) countries that surround the oil-rich Persian Gulf.`