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Why US Becoming Top Oil Producer May Help India

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The International Energy Agency had predicted that the US would be toppling Saudi Arabia as the number one crude oil producer in the world as early as 2012. And by 2014, it was true. The US achieved this on the back of the shale oil revolution which is a result of enhanced technology. The US produced 15.9 per cent more oil in 2014 at 11.6 million barrels of oil per day to topple Saudi Arabia's 11.5 million bpd production, according to BP Plc's Statistical Review of World Energy.
 
At present, this looks like good news only for the US economy as they are likely to become self sufficient in energy needs. The world has no reason to cheer as US crude oil exports were effectively banned under laws that were enacted in the 1970s in response to the OPEC oil embargo. However, there is a hue and cry from social groups and intellectuals urging US to start exports of crude oil to the developing countries as production of crude oil in the US has increased close to 100 per cent since 2008.
 
Moreover, there is a huge mismatch between the types of oil that US fields produce and the types that US refiners need, the products that US consumers want, and the infrastructure in place to transport the oil. Due to less demand by the domestic refiners, the oil producing companies are  forced to either leave the oil in the field or pumping it at depressed prices. There for, the lobby of the oil producers has also been demanding the lifting on ban on exports of crude oil from the US. The lobby’s voice will get louder now.
 
Impact on India and the world…
In case the US decides to bring its crude oil in international market for exports, it can further create a glut in the oil market leading to fall in the crude oil prices. The crude price has recovered  by over 30%  Since January 2015 when the price in the international market went below $50 per barell.
 
At Present, the price of WTI crude and Brent Crude is $61.43 per barel and $65.70 respectively.
 
India that as been pressurizing US to sell its crude oil to it in lieu of its decision to reduce oil imports from Iran after the US put embargo on the country in 2012. India’s oil minister, Dhramendra Pradhan has announced in the past that his department was in talks with the US government to get crude oil at cheaper price in from the country.
 
In case Asia’s second largest energy guzzler starts importing oil from the US, in all likelihood the OPEC countries will be hard-pressed to give higher discounts to India for long term contracts. Already India has reduced its imports from Saudi Arabia and its crude oil imports during January 2015,dropped 8.85 per cent to 3.19 million metric tonnes from 3.5 million mt imported during the same period last year.India spends above around $145 billion on purchasing crude from the international market.
 
The Indian refiners are asking for a better price from the oil producing nations. US becoming the largest oil producer may just prove to be a shot in the arm.
 


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