Article 2: Unlearnt lessons
Why in news: The Centre increased petroleum product prices after four years amid rising crude oil prices, a weakening rupee, and concerns over India’s inadequate strategic petroleum and gas reserves.
Key Details
- The government raised fuel prices due to rising global crude oil prices and heavy losses faced by public sector oil marketing companies (OMCs).
- India’s Strategic Petroleum Reserve (SPR) holds about 36.7–39 million barrels, sufficient for only around seven days of consumption demand.
- Compared to India, the U.S. and China possess much larger oil reserves, giving them stronger protection against global supply disruptions.
- India remains highly vulnerable in LPG and LNG storage, with limited reserves and no underground LNG storage facilities.
- Countries with stronger reserves can rely on long-term contracts and avoid sudden spot market price spikesduring international crises.
Fuel Price Hike After Four Years
- The Centre increased retail petroleum prices after a gap of four years.
- The hike was expected because of rising global crude oil prices.
- Public sector oil marketing companies (OMCs) were facing heavy under-recoveries and financial losses.
- The decision was delayed until after the Assembly election results.
- Rising fuel prices have added pressure on consumers and the economy.
Economic Concerns Behind the Hike
- The Prime Minister called for austerity measures due to pressure on foreign exchange reserves.
- The Indian rupee has sharply depreciated in recent months.
- Rising fuel costs contributed to higher inflation in April.
- These issues exposed India’s long-standing weakness in energy security.
- The crisis highlighted inadequate strategic petroleum and gas reserves.
India’s Strategic Petroleum Reserve (SPR)
- India developed a Strategic Petroleum Reserve (SPR) after the economic vulnerabilities seen post-1991.
- The reserve currently stores around 36.7–39 million barrels of crude oil.
- This stock is enough for only about seven days of national consumption demand.
- India consumes nearly 5.5 million barrels per day (mbpd).
- Including OMC inventories and import cover, total reserves exceed 70 days.
Comparison with the U.S. and China
- The United States built massive reserves after the 1973 oil shock.
- America’s SPR originally reached about 714 million barrels, far larger than India’s reserves.
- China has even larger reserves of nearly 900 million barrels.
- The U.S. also produces around 13 mbpd of oil, improving its energy security.
- Both countries maintain reserve levels above the 90-day benchmark recommended by the International Energy Agency (IEA).
India’s LPG and LNG Vulnerability
- India has only about 1.4 lakh tonnes of LPG storage capacity.
- Daily LPG consumption is around 80,000 tonnes, making reserves limited.
- India lacks underground Liquefied Natural Gas (LNG) storage facilities.
- LNG is crucial for industries such as fertilizer production.
- India mainly depends on storage at Petronet LNG and BPCL regasification facilities.
Global Lessons and Strategic Importance
- The European Union (EU) strengthened energy security after the Russia–Ukraine war.
- Advanced economies use large reserves and long-term contracts to avoid sudden spot market price spikes.
- China benefited economically by continuing imports of discounted Russian oil.
- Greater strategic autonomy could have helped India reduce energy risks.
- Expanding reserves and diversifying energy sources are essential for long-term energy security.
Conclusion
India’s rising fuel prices expose the country’s continued dependence on imported energy and its insufficient strategic reserves. Compared to major economies, India lacks adequate storage capacity for oil, LPG, and LNG, increasing vulnerability to global disruptions and inflationary pressures. Strengthening energy security through larger reserves, diversified imports, and long-term supply strategies is essential for economic stability and strategic autonomy.