Good job keeping a lid on crude prices

India has used decades-old contracts among oil-buyers and -sellers that have been broken to its considerable advantage over the last two years. China and India now consume as much oil as the US. The two countries have been able to forge a new order in the international market as a result of this development. They have scuttled a Western embargo of Russian oil and have reduced Opec‘s capability to hold prices through controlled supply. These are big moves for India, which is going to drive global crude oil demand growth in the medium term, both for domestic consumption and petroleum exports. It has also sequestered its coal demand from climate commitments by refusing to single it out among fossil fuels.

Shifting energy consumption was bound to fray geopolitical arrangements designed to secure supplies. Moscow’s position on Ukraine would be influenced by Asian oil consumption. Europe’s tilt towards supplies from West Asia could have netted out the effects. The spoiler, though, has been Saudi Arabia’s growing distance with the US over alternative energy. Opec’s production cuts have brought US supplies on stream. The cartel itself is facing revolt among indebted African producers over supply restrictions. With the Saudi price cuts in the new year, the outlook for oil in 2024 has turned decidedly bearish.

All of which play out to the benefit of India’s economic momentum. Crude oil packs the biggest punch in India’s twin deficits, fiscal and trade. Capital flows into energy-importing India naturally track crude oil prices. New Delhi has negotiated the world’s latest energy crisis adroitly and has done itself, as well as the world, a favour by helping keep a lid on crude oil prices. Its energy diplomacy is consistent with the thrust on resolving conflict and its effect through consensus. India’s self-interest in securing energy has, in no means, added to international tension. Which is why New Delhi has got its viewpoint across so tellingly. There could just be a new way for future energy contracts to be drawn up.