Twist of Fate: Price of Crude Oil Less Than Drinking Water in India

The price of a liter of crude oil in India is 12 rupees, three cents cheaper than the price of a liter of clean water which comes in at 15 rupees. Despite the fall in prices of petroleum products, inflation in the country is on the rise. The fall in oil prices has not benefited the Indian population; on the contrary, the government has increased the price of the excise tax on gasoline production for the third time in the last two months.

A similar, although less dramatic, situation can be seen today in other countries, particularly in Russia where despite the drop in oil prices, the cost of petroleum products have not undergone any significant changes.

Firstly, it should be understood that the oil we see in the market is a finished product. It was produced, processed and poured into a barrel. In Russia the cost of extracting one barrel of oil is around $6, the same amount goes to its transportation costs ($ 5.7).

In addition, there is also tax on oil exports, which ultimately leads to the fact that the net profit per barrel is only about 30-35% of its market value.

If the government reduces the price of petroleum products following the collapse in the oil market, then oil and gas companies will eventually produce nothing, leading to a profound energy crisis in the near future.

Similarly, it is necessary to take into account that Russia is one of the largest producers and exporters of oil. Countries that have limited oil resources, in particularly India, are in a dire situation. Currently, the market price of a barrel of oil is around $ 30.5.

Representative of the Business Council of BRICS countries in India, energy expert Narendra Taneja spoke to Sputnik about this situation saying that, “Indian oil giant ONGC is spending $37 on production of a barrel of oil in the Bombay High fields. It is the largest oil field in India. The question remains if oil becomes even cheaper, how long can it stay low for? The situation is unstable especially because if prices remain low for a long time the producing countries will face economic, social and political instability.”

The expert further added, “On one hand it may seem that a low oil price is good, but in fact it will hit exports. If prices remain lower than $40 per barrel, it would be very bad news for the world economy.”

Comparing the price of water to oil in India, Aman Arawal director of the Indian Institute of Finance, said, “You have to understand that we are talking about the price of crude oil on the world market, but it is not the price for the consumers. The price of oil is 55-60 rupees per liter, making such comparisons incorrect.”