India, the world's third-largest energy consumer and importer, on Wednesday warned of high oil prices hurting the nascent and fragile global economic recovery and floated an idea of long-term supply contracts that provide predictable and stable pricing.
Speaking at the India Energy Forum by CERAWeek, Oil Minister Hardeep Singh Puri said there was a mismatch between demand for oil and the supplies producers such as OPEC+ were making and there was a case for raising the production.
The world, he said, needs "predictable, stable and affordable" prices for it to recover back to pre-pandemic levels.
Oil Secretary Tarun Kapoor said importing nations like India currently enter into a one-term contract to buy oil from OPEC nations such as Saudi Arabia and Iraq. These contracts provide stability of only volume and the price is the one that prevails in the international market at the time of delivery.
"Much like gas contracts that are of up to 25 years duration and priced at some benchmark, oil too should have long-term contracts with pricing benchmarked at some alternate fuels such as coal or even gas," he said.
OPEC+, he said, should rise to the occasion and raise output to meet the expectations of its consumers.
Petrol and diesel prices in India have shot up to record highs across the country after relentless price increases since early May.
"Global economic recovery can be undermined if energy prices remain high. That is not only true for developing countries India but also other industrial democracies," Puri said. "It is in everybody's interest that we sustain global economic recovery. And therefore, it is in the interest of both the producing countries and the importing countries to have stable and affordable energy."
Energy, he said, is crucial to the revival of the global economy after the devastating pandemic.
High oil prices will slow down the recovery and as a consequence the demand.
"There is a direct co-relationship between the revival of economic activity with price," he said.
"I am sure our friends in OPEC+ will factor in the sentiments" of consuming nations.
"We look forwards both as a consumer and as a large economy, one whose energy requirements are only likely to grow, to energy transition being predictable and orderly," the minister said.
Puri was echoing the sentiments of Japanese Prime Minister Fumio Kishida, who said on Monday that the recent increase in prices should encourage oil-producing countries to ramp up output.
But it appeared the Organization of Petroleum Exporting Countries (OPEC) and its allies, called OPEC+, would pay any heed to their largest customers.
Saudi Energy Minister Prince Abdulaziz bin Salman, also speaking at the CERAWeek event, lauded the cartel's excellent stewardship of the market, saying the OPEC+ approach to managing supply should be copied and pasted into other energy markets.
"If energy prices remain high, global economic recovery will be undermined," Puri said.
International oil prices had crashed to USD 19 per barrel in April last year as demand evaporated with most nations clamping lockdowns to control the spread of coronavirus. The demand recovered this year as vaccination against the infection revived economies the world over.
International benchmark Brent crude has since rallied to over USD 84 per barrel.
This, he said, has made fuel expensive and stoked fears of inflation.
Puri said India's oil import bill has climbed from USD 8.8 billion in June 2020 quarter to USD 24 billion this year because of a spike in global oil prices.
"India believes energy access has to be reliable, affordable and sustainable," he said adding economic recovery after a devastating pandemic has been fragile and it is further being threatened by high prices.
India, which imports almost two-thirds of its oil needs from West Asia, has told crude oil producers, including the OPEC, that high oil prices will hasten the transition to alternate fuels and such rates will be counter-productive for the producers.
Puri has in recent weeks flagged the issue of high oil prices to Saudi Arabia, the UAE, Kuwait, Qatar, the US, Russia and Bahrain.
He conveyed India's strong preference on responsible and reasonable pricing, which is mutually beneficial for consumers and producers.
"I have been meeting my counterparts from the producing nations to drive home the point," Puri said adding volatility in international prices is not just hurting India but also industrialised nations.
While the world has begun the transition towards cleaner fuels such as electric-powered vehicles and hydrogen, most nations are still dependent on oil to fuel their economies. And high oil prices will hurt demand recovery.
India is 85 per cent dependent on imports to meet its oil needs and relies on overseas shipments to meet 55 per cent of the gas needs. It is the only nation in the world that is seeing growth in oil demand on a sustained basis and without it the producers will also suffer.