India will be releasing 5 million barrels of oil from its strategic oil reserve in a coordinated move with US, China, Japan and South Korea.
This is the first time that India will be dipping in its strategic reserve to use it as a geopolitical tool.
The OPEC+ cartel has kept crude oil production at lower rate, which has resulted in escalation of prices in international market.
The US will be releasing 50 million barrels of oil and the UK has announced that it will release 1.5 million barrels of crude.
Need for releasing
The move is an effort by oil importers to put pressure on OPEC+, a group that consists of 23 oil exporting countries including Saudi Arabia and Russia.
The grouping has set production quotas for member countries so that oil production is controlled to keep prices higher.
India has requested oil producing countries to increase their production at multiple forums as high prices is affecting post-Covid economic recovery in the developing countries.
Effect on crude oil prices
The coordinated release of oil has reduced the price of oil from a high of $86.4 in late October to under $80 per barrel.
This however could not crate the desired effect as US released less crude than it was expected. The coordinated release may add 70-80 million barrels.
There has been indication that Saudi and Russia, the two largest producers of the group, may gradually increase production.
Impact of high crude oil prices on India
Consumers are paying an all-time high price for petrol and diesel. The prices have not declined much despite the centre cutting tariffs. The increase in fuel prices has resulted in inflation.
Strategic reserves in India
The strategic reserves are set up to build an emergency stockpile with millions of barrels of crude oil for emergency use.
India currently has a capacity to store 5.33 MMT of crude oil across three locations on east coast and west coast.
On east coast, Vishakhapatnam has capacity of 1.33 MMT. On west coast, Mangalore (1.5 MMT), and Padur (2.5 MMT) are the two locations.
The strategic reserves combined with storage facilities of Oil Marketing Companies (OMCs) in the country, can cater to meet 64.5 days of requirement.
India imports about 85 per cent of its crude oil requirements. The International Energy Agency (IEA) asks countries to hold stock worth 90 days of imports.