Stabilizing Global Oil Prices: India asks for Saudi Help

Indian Prime Minister Manmohan Singh has asked for Saudi Arabia’s help in ensuring that global production and pricing of crude oil remain stale, in order for third world economies not to be adversely affected.

The Prime Minister brought up the topic during his meeting with the visiting oil minister of Saudi Arabia, Ali al-Naimi. He told the Saudi oil minister that the unstable nature of the production and pricing of crude oil in the global context was affecting the economies of import-dependent economies such as India. Al-Naimi is here to be part of the Petrotech conference, along with oil ministers of other OPEC countries.

In his meeting, he requested the Saudi oil minister to exert Saudi Arabia’s influence on OPEC members and urge them to avoid resorting to measures that led to instability in pricing and production of crude oil. Al-Naimi, however, said there was nothing much he could do, as it was the market that determined finally the price of oil, not individual countries. He said, “We do not want to see volatility in the market (but) the prices are determined by the market.”

Speaking to reporters after his meeting with Mr. Singh, al-Naimi said that the oil producing countries merely look at the supply and demand, and also the inventory levels, and then hope that all these three elements critical to the price of oil, maintained an equilibrium. When that happens, there is more stability in pricing as well as availability.

Before the Prime Minister met the visiting oil ministers, they were met by their counterpart in India, petroleum minister Murli Deora, who delivered the same message to them: the instability in the crude oil situation was hurting India. Deora said that though oil prices had actually come down this year, there was a need for them to come down further.

Earlier during the week, Venezuela, a member of OPEC, had asked for an extraordinary meeting of Petroleum Exporting Countries (PEC) to take the decision to cut down on crude production, in order to stop the price of crude oil from falling further. This was after Venezuela and Nigeria has brought down their production levels, in October 2006, a combined 170,000 barrels.

The fluctuation of oil prices affects countries like India, which depends on imports for 73 percent of its home oil requirements, heavily. The sharp rise in crude oil prices in the international market, to $76 a barrel between the period of April through October 2006, had directly impacted the Indian market, causing oil prices in the domestic market to shoot up $29.322 billion, a steep jump of 45 percent. This was from a price of $21.165 billion during the same period the previous year.

Currently, the price of crude oil in the international market is hovering at around $50 per barrel.