Union Minister for Petroleum and Natural Gas Dharmendra Pradhan termed the situation prevailing in the oil market as “extraordinary” but more or less ruled out any fuel price cuts in India despite the supply glut, stating that the Union government had taken a “cautious and conscious” decision to use savings for welfare.
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Speaking to The Hindu in an exclusive interview on Monday, Mr. Pradhan was also optimistic that the price stabilisation of oil was likely as more and more countries were trying to restart economic activity after lengthy lockdowns over COVID-19 .
“The oil industry is faced with an extraordinary situation. These are not normal times. Slippage of crude prices is coupled with disappearance of demand worldwide. The situation arose first because of the price wars between oil exporting nations. Earlier, the oil producing countries could resolve their differences and reduce production, then COVID-19 struck. Due to the lockdowns in major economies, the demand dried up. There were no takers for the crude being produced, the world literally ran out of storage space for the crude and petroleum products,” the Minister said.
“The reduction of demand has led to a peculiar situation where the product prices are less than the price of the crude. These negative margins and low crude prices do not reflect the real economics of oil refining and pricing of end products. Our government’s view is to take a cautious and conscious approach of a balance in price, save it and use it for welfare,” he said.
“I think, in the coming months, we are going to see more efforts to balance the supply-demand factors as majority of countries are trying to resume economic activities with gradual lifting of lockdowns. I am confident that the revival of our domestic demand will surely help improve the global supply- demand equilibrium, thus bringing greater energy market stability,” Mr Pradhan added.
