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Record-high gasoline and diesel prices stalled India’s fuel demand recovery in February, with oil consumption down by 5 percent to its lowest level since September last year, government figures showed on Friday.
Consumption of diesel—the most used fuel in India—declined by 8.5 percent, while gasoline demand dropped by 6.5 percent, according to data from the Petroleum Ministry, cited by PTI.
Last month, gasoline and diesel prices in India—the world’s third-largest crude oil importer—surged to record-high levels, but state-held refiners eventually stopped price hikes at the pump.
India’s fuel demand had just started to recover almost to the levels from before the pandemic, but the rally in oil prices this year and the fuel taxes sent fuel prices to record highs. The record prices pose a threat to the recovery of consumption and risk ruining the central bank’s targeted inflation numbers and monetary policy to support economic growth this year.
Top Indian officials have criticized in recent weeks the OPEC+ alliance about the “artificial cuts” to inflate oil prices. India, which depends on imports for around 80 percent of its oil consumption, has been restless about the higher oil prices, which push up its oil import bill and domestic inflation.
Last week, OPEC+ surprised the market by deciding not to lift collective crude oil production from April, leaving only small exemptions to Russia and Kazakhstan, as it did in its January meeting.
India is concerned that the OPEC+ decision not to lift oil production could hurt the consumption-led recovery in oil demand, Indian Petroleum Minister Dharmendra Pradhan said after the alliance’s meeting.
India is also reportedly asking its state-owned refiners to aggressively look to diversify imports away from the Middle East, as the world’s third-largest oil importer isn’t happy with the tighter oil market and higher oil prices.
“We have asked companies to aggressively look for diversification. We cannot be held hostage to the arbitrary decision of Middle East producers. When they wanted to stabilize the market we stood by them,” a government source told Reuters this week.
By Michael Kern for Oilprice.com
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Michael Kern is a newswriter and editor at Safehaven.com and Oilprice.com,