Recently, there has been an incident of standoff between the United Arab Emirates and OPEC Plus (OPEC+).
Indian impact of standoff between UAE and OPEC+
- Recent talks between the United Arab Emirates (UAE) and the Organization of the Petroleum Exporting Countries Plus (OPEC+) group on extending a global agreement to cut oil production beyond mid-April 2022 have not reached a consensus.
- In the backdrop of the fall in oil prices in 2020 due to the COVID-19 pandemic, the OPEC Plus group signed a two-year output pact in April 2020 to drastically cut crude oil production to achieve better prices.
- Worldwide, oil prices rose to pre-Covid levels in November 2020 due to the continued launch of vaccination programs and a pick-up in economic activity. However, the OPEC+ group maintained low levels of production, and it was only after sharp criticism from developing economies, including India, that OPEC+ countries agreed to gradually increase crude oil production.
Impact on India
- OPEC Plus accounts for more than 80 percent of India’s oil imports. India is currently facing record-high prices of petrol and diesel. Thus, if the impasse is not resolved, the expected relief may be delayed.
- This will slow down the economic recovery of developing economies after the pandemic. Higher prices can also widen the current account deficit and add to inflationary pressures on the economy.
About OPEC and OPEC Plus
- OPEC is a permanent and intergovernmental organization. It was established in the year 1980 during the Baghdad Conference. It’s headquarter is located in Vienna.
- Non-OPEC countries that export crude oil are called OPEC plus countries. These include countries like Russia, Mexico, Malaysia etc.
Source – The Hindu
