Crude Oil (“Oil”) is well known for its importance in promoting the growth of an economy. The world consumes about 76 million barrels of oil per day, and the Organization of the Petroleum Exporting Countries (“OPEC”) controls approximately 60% of the world's oil reserves, with its exports accounting for 55% of all oil traded globally. It is to be noted that OPEC, which also accounts for 40% of annual Oil output, acts as a cartel to control Oil prices with the dual aim of price stability and maximum income for OPEC members.

OPEC currently consists of 13 members namely Algeria, Angola, Congo, Equatorial Guinea, Gabon, Iran, Iraq, Kuwait, Libya, Nigeria, Saudi Arabia, the United Arab Emirates, and Venezuela (collectively referred to as “Members”). Venezuela was the first nation to approach Iran, Iraq, Kuwait, and Saudi Arabia in 1949 to discuss the formation of OPEC.OPEC was established in Baghdad Conference (held from September 10 – 14, 1960) in response to a 1960 law enacted by US President Dwight D. Eisenhower that imposed quotas on Venezuelan Oil imports in favor of Canadian and Mexican Oil industries[i]

The primary goal of OPEC is to determine the best ways to protect the interests of its Members, which includes devising ways and means to ensure price stability in international Oil markets securing a steady income for the Members, an efficient, economic, and frequent supply of petroleum to consumers and a reasonable return on investment for those who invest in the petroleum industry.


The general public perceives the entire Oil industry as a single organization. However, on the contrary to the general opinion, the global petroleum industry is made up of a variety of players involved in various aspects of the industry, namely(a) exploration and processing of Oil (b) gathering (c) refining or manufacturing of intermediate and final goods (such as gasoline, petrol, diesel, Applied Flow Technology supplies, chemical feedstock, lubricants, and waxes (d) refined product distribution and storage facilities such as pipelines and terminals; and (e) marketing and retail operations


India is placed amongst the world's top 10 Oil consuming countries and consumes around 2.2 million barrels per day. However, India does not have sufficient oil reserves of its own and imports nearly 70% of the overall Oil consumed therein from OPEC Members, which makes it one of the top importers in the world. To give all this a better context, around 30% of India's overall energy consumption is derived from Oil.

The Indian economy is currently experiencing slow growth and high inflation. Given the sharp rise in international oil prices and India's major reliance on imports, the government's decision to raise the price of petrol, diesel, and LPG was unavoidable. On August 2nd, 2008, the rate of inflation increased to 12.91 percent, owing primarily to higher Oil prices, as Oil is a commodity that is used universally in almost everything (directly or indirectly) and affects the cost of production of all other commodities. The increases in oil prices in recent times have had a cascading impact on the prices of basic goods, affecting majorly the common man, not in good ways. Because the higher price of fuel has had a detrimental influence on the future, the Indian government will increase excise duty on diesel cars, increasing the cost of diesel cars by 8-10%. The current state of affairs reveals a lack of consistent visibility. The current scenario reveals how difficult it is to forecast future events.


After the United States, China, and Japan, India was ranked the fourth-largest producer of Oil and petroleum products in 2013, as well as the fourth-largest net importer of oil and petroleum products. The key point to note here is that the difference between India's Oil demand and supply is growing rapidly, with demand reaching nearly 3.7 million barrels per day in 2013, compared to total domestic production of fewer than 1 million barrels per day.

According to the International Monetary Fund, India's annual (inflation-adjusted) gross domestic product (“GDP”) growth has decreased from a peak of 10.3 percent in 2010 to 4.4 percent in 2013. This is due to the recent slowdown in ‘emerging market countries'’ growth higher inflation levels as well as multiple constraints in domestic supply and infrastructure. In 2013, India had the world's third-largest economy, both in terms of GDP as well as in terms of purchasing power parity. High debt levels, infrastructure deficits, delays in structural reforms, and political polarization between India's two main political parties, the Indian National Congress and the Bharatiya Janata Party, are all amongst the major threats to the country's economic growth[i]

As per the projections given by Energy Information Administration[ii] by the year 2040, India's demand would have increased by more than double to 8.2 million barrels per day, while domestic production would remain stagnant at around 1 million barrels per day. To meet the rising demands, Indian Oil Companies have had to diversify their supply sources due to their heavy reliance on imported oil. To acquire reserves and production capacity, Indian Oil companies have had purchased equity stakes in overseas oil and gas fields in South America, Africa, Southeast Asia, and the Caspian Sea region. The majority of imports, however, continue to come from the Middle East, where Indian companies have limited direct investment opportunities.

To meet the increasing demands of its people, India is becoming increasingly reliant on imported fossil fuels, despite having large coal reserves and a healthy rise in natural gas output over the last two decades. Mr. Veerappa Moily, India's former Petroleum and Natural Gas Minister under the Manmohan Singh government, announced in 2013 that his ministry will work on an action plan to make India energy independent by 2030, which may include increased fossil fuel production, creation of resources such as coal bed methane and shale gas, international acquisitions of upstream hydrocarbon reserves by Indian Oil Companies, reduced motor fuel subsidies, and a national energy policy. Thereafter, Mr. Dharmendra Pradhan, the incumbent Petroleum and Natural Gas Minister, who assumed office in late May 2014, reaffirmed India's aim of being energy self-sufficient. India is also attempting to expand and leverage its renewable energy resources. These actions will effectively increase India's energy supply while also increasing productivity in the energy sector. These actions will effectively increase India's energy supply while also increasing energy consumption quality. Over the last two years, India has also begun to introduce Oil and natural gas price reforms to encourage long-term investment and reduce subsidy costs.


Petrol prices in Delhi, Mumbai, Chennai, and Kolkata climbed steadily in May 2021 after remaining stable in March and April 2021. In Mumbai, the price of petrol surpassed Rs. 100 per liter, while rates in the other three cities were above Rs. 90 per liter. Pump prices have risen due to a surge in international crude oil costs and excessive taxation[iii]. In comparison to their neighbors, Indians are now paying the highest costs for a liter of petrol.[iv]

Crude price vs pump price

Between January 2019 and May 2021, the figure shows the petrol price in Delhi (left axis) versus the crude price in - Indian basket (right axis). Even when crude oil prices were relatively low between April and December of last year, the price of petrol at the pump increased due to tax increases.

On May 24, the average price of fuel in India was 95.43/liter, the highest in comparison to prices in neighboring nations and countries with similar economies (converted to rupee terms).


To conclude, the condition of the Indian economy is extremely concerning. Petrol prices have been raised, and diesel deregulation is on the way, along with a domestic gas price hike. All of this would undoubtedly create chaos. OMCs are pounced on by persistent demands for more disinvestment in the public sector, seeking more flesh and blood. And all of this is so that the massive sums of money they've amassed can be put to good use. This is the real reason for the increase in gasoline prices. A viable and long-term pricing mechanism for petroleum products is a crucial condition for the economy's long-term stability. Similarly, a financially sound and globally competitive Oil sector offers a long-term foundation for the country's energy stability. As a result, the producers of Oil products must have the right to set prices in response to competitive market conditions. The government must provide subsidies to the targeted customers in a way that does not jeopardize the competition in the market. The price of gasoline is directly proportional to the price of crude oil on the international market. As a result, the country's recent increase in fuel prices might be attributed to many causes. While the government can play a role in lowering prices, blaming the government alone for the increase is wrong. In response to the rising fuel prices, many state governments have reduced their VAT rates, while the Central Government has reduced its excise charge on petrol and diesel by a flat INR 2 per liter. As a result, we may conclude that the government has a role to play in the country's fuel pricing, but it is not the only determinant of fuel prices. Bringing gasoline and diesel under the GST regime is another long way to go, but it will be done soon. In the foreseeable future, however, this would not be possible. As previously stated, the sinking Indian rupee and rising fuel prices have an adverse relationship. As a result of current trends, Petrol Prices at INR 100 per liter are projected to be stabilized shortly. The ramifications of the same would be both favorable and bad. Increased use of public transportation and demand for greener energy would result in more environmentally friendly resources in the long run.



[i] Oil Dependence and U.S. Foreign Policy 18502017, https://www.cfr.org/timeline/oil-dependence-and-us-foreign-policy, last visited on 26th June, 2021

[ii] Petroleum Planning and Analysis Cell (2009, 2010), Oil Prices and Taxes,2010
[iii] The Energy Information Administration’s (EIA) Crude Oil Inventories measures weekly change un the number of barrels of commercial crude oil Inventories influences the price of petroleum products, which can have an impact on inflation.
[iv] ABHILASH, Fuel Price Rise Again, https://influencermagazine.uk/2021/05/fuel-price-hike-again/, last visited 26th June, 2021

[v] Sumant Sen, Data | Petrol price peaks in India owing to high taxes and crude oil prices, MAY 31, 2021, https://www.thehindu.com/data/data-petrol-price-peaks-in-india-owing-to-owing-to-high-taxes-and-crude-oil-prices/article34687020.ece, Last visited on 27th June, 2021.

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