00:00OK, let's turn to the big story that's coming in at the moment, a story that could send shockwaves across
00:05the world, not just in India, because a big blow now to the entire OPEC, the oil, petroleum exporters countries
00:14in the Gulf region amidst tensions in West Asia.
00:17UAE has decided to leave the global oil producers body. UAE has announced that they will leave OPEC from the
00:261st of May. This comes, remember, amidst the West Asia conflict and the manner in which oil prices have gone
00:33out of control.
00:34Every country now looking for an energy strategy. Meanwhile, we are also getting reports. Gasoline prices in the United States
00:42have now reached $4.18 per gallon, their highest level in four years.
00:49So UAE announcing that they are leaving OPEC and America has now seen its highest oil price. Are we heading
00:57for an oil shock is what is being speculated across the world.
01:03And what does it mean for us in India, particularly when the government is claiming that they will not raise
01:07oil prices once elections are over tomorrow?
01:10How long can we hold on? What does this UAE exit from OPEC mean? How can the world tackle this
01:16prospective oil shock that's coming in?
01:19How long can the Indian government, the Modi government, cushion a fuel burden? Lots of questions to be answered.
01:25Joining me now, Narendra Taneja, global energy and geopolitical expert. He was, at one stage, a BJP spokesperson as well.
01:33Good to have you, Narendra, on your subject of expertise. Also, I earlier spoke to Pamela Munga.
01:38She's lead senior market analyst at Vortexa. And I want to come to you, Pamela, first, because the big story
01:44that we've just heard,
01:45United Arab Emirates deciding to move out of OPEC starting the 1st of May, which is suggesting that even the
01:52oil petroleum exporting countries now facing the heat
01:55and do not want to work within the existing system. Are we seeing the endgame for OPEC and a serious
02:01energy crisis now?
02:03I mean, that was quite a big announcement. I agree. And I think we're still trying to digest that particular
02:09piece of information.
02:11But that's quite a big game changer is when you see these types of nations start to pull out of
02:19OPEC and say, we're going to handle this on our own.
02:23You know, it's seven days, Pamela. This is just the latest step taken.
02:28We are seeing a continuous surge in oil prices. They've crossed $110 a barrel today.
02:34We are seeing U.S. prices now reaching gasoline prices, reaching record highs.
02:39No signs of the conflict being resolved. How bad could this guess?
02:43What is your biggest fear now when it comes to oil prices?
02:47Well, that's a great question. My biggest fear is that this continues on with no sign of opening up.
02:56And I think that's what everybody's biggest fear is, because that means it will capitulate into a very poor picture
03:05for the global economy.
03:07So are we going to see these prices rise steadily if the state of Hormuz remains locked up and the
03:13U.S. continues with this blockade?
03:15Are we heading for an oil shock not too different from what we saw in the 1970s?
03:19Or am I being excessively alarmist?
03:23I think that for now what we've seen are kind of Band-Aid, if you will, type of reactions.
03:32And that's keeping supplies and prices somewhat limited in terms of what we're seeing in the oil markets.
03:40Also, you have to consider the strategic petroleum releases that we've seen and the consumption reaction, which is to conserve,
03:52especially in the Asian markets.
03:53But as this goes forward and continues on, yes, I think we could see, we're definitely going to see higher
04:01prices, which will eat into demand,
04:03which will cause demand destruction long term if this goes on five or six months.
04:09Because at the moment, what we are seeing, Ms. Munga, is a supply-side crisis.
04:13The reduced movement of oil through the state of Hormuz shipments have dropped to around, what, 567,000 barrels per
04:20day,
04:20down from an average of 1.85 million barrels.
04:24Iran is bearing the brunt of it, doesn't know what it can do with its oil because of this blockade.
04:29Its production is significantly lower.
04:31Do you see economies now coming under huge stress, including countries like India?
04:36Will we struggle to hold on to our oil prices?
04:40Absolutely.
04:41I think certainly we've seen India's approach has been a very good approach, increasing refinery runs mainly to cover LPG
04:51for cooking.
04:52So that's been quite positive.
04:54You've seen the Russian waiver, which has meant that India has taken a lot more Russian crude that was at
05:00sea.
05:00They're also looking at other locations like Venezuela and also taking a lot of those barrels that have been rerouted
05:09through the Red Sea into India.
05:12But India is still looking at far fewer barrels to run through its refineries.
05:20The Russian waiver makes Russian urals more expensive.
05:23So refineries now are making less on the barrel, essentially.
05:29So that's not a great picture.
05:32And overall, you know, it's going to keep economies such as India from possibly from growing as fast as they
05:42would want to.
05:43Now, I think as further this goes on, you're going to need to start to feel pain in places like
05:49in America,
05:51which is likely the last place to feel a large amount of pain in terms of prices.
05:57And that's probably a couple of months down the line.
06:01We're going to feel a lot of pain.
06:02That's a good point on which to bring in Narendra Taneja.
06:05You heard Miss Munga, who I spoke to earlier, saying that, look, sooner or later, we're going to feel pain.
06:11In India, the government has announced today, or certainly through sources, that prices will not be increased even after tomorrow
06:18when the election campaign is over.
06:20But how long can India hold on and how bad can it now get?
06:25Well, you see, we are already, Rajdeep, we are already into the biggest oil shock ever in the history of
06:32humankind.
06:34That's the situation now.
06:36The biggest oil shock ever?
06:38Absolutely.
06:39The biggest oil shock ever in the history.
06:42We are into it.
06:44Much bigger than 1970s that you referred to, Rajdeep.
06:47Now, the question is that an oil is the backbone of the global economy.
06:52It's not only about India or the US or Japan or China.
06:55It's about the whole world.
06:57And what's happening in the Persian Gulf area is basically shock the global oil industry and basically hit the very
07:05backbone of the world economy, including that of India.
07:08So we can't say that we are an exception.
07:10No country is an exception, including the United States, which is the biggest producer of oil in the world and
07:15also the biggest consumer.
07:16Since we happen to be the third largest consumer of oil in the world and the second largest importer, you
07:22know, that means that, you know, beyond a point, we will also be affected and impacted.
07:26Now, the question is that, you know, our companies have done a great job, public sector and the private sector,
07:32in terms of bringing oil from wherever they can.
07:35They bring oil from 41 different geographies.
07:37So they've done a great job, I think.
07:39However, that said, at the same time, how long you can really fight with the situation which is being now
07:46in a final term as the biggest, you know, oil crisis ever.
07:51So that's the challenge for the world economy, that's the challenge for American economy, for Chinese economy, Japanese economy, by
07:58the way, and also Indian economy.
08:00So no country is out of fact.
08:02So how does one, how does one hold on, how long can the government hold on to keeping oil prices
08:08at the level they are?
08:09Is it inevitable now, like we are seeing across the world, that oil prices will rise in this country in
08:15a few days' time?
08:16Well, it's a very important question, Raz.
08:19The question is, if you remember, in 2010, oil was decontrolled when the Manmoun Singh government was in power.
08:26In 2014, diesel was decontrolled.
08:29Decontrolled means the government had no role to play in the day-to-day prices of petroleum products, including petrol
08:35and diesel and so on.
08:36Now, the question is, that was a decision taken by the cabinet in 2010 and implemented in terms of diesel
08:42in 2014.
08:43However, at the same time, oil is a political commodity world over.
08:48World over.
08:49You see, it's 90% politics.
08:51But my own, you know, worry is that our companies, there is a mandate to our companies like Indian Oil,
08:58Bharat Petroleum, Hindustan Petroleum, and also to private players, go out, reach out and bring oil from wherever you can.
09:04But for that, they need a strong balance sheet.
09:07They need a kind of, you know, an economic health that they can go and project and at the same
09:13time negotiate with.
09:15Say, all right, I want oil from you.
09:16I'm ready to pay.
09:17And you, you know, and you have to give me 10 days credit or 15 days credit and so forth.
09:22There is also shipping cost.
09:23There is insurance cost.
09:24So it's multidimensional and extremely complex.
09:27So I think to the best possible, what is important, these companies so far have insulated the Indian consumer to
09:34the extent possible.
09:35But if the war continue and oil prices go beyond $120 per barrel on the computer screen, however, the Indian
09:42basket prices have already exceeded $120 per barrel.
09:46That's the situation.
09:47But if oil prices keep rising and there is no kind of solution in terms of what is happening in
09:52the Gulf, then we are talking, looking at the picture where oil prices may actually go to $120, $125.
09:58In such a situation, I think our company, though they want to, but they may not be able to protect
10:03the ordinary Indian consumer and also the Indian industrial consumer.
10:07So it's a huge challenge for the Indian economy, huge challenge for the Indian government and also the state governments
10:13and also huge challenge for Indian companies, whether public sector or the private sector.
10:18Well, either way, what we are seeing, as you just said, possibly the biggest oil shock since the 1970s.
10:24We'll come back on another day and discuss this in even greater detail.
10:28For now, Narendra Taneja and Ms. Bunga appreciate you joining me on the show tonight.
Comments