By Noor Mohd, IANS
New Delhi : With the Indian crude oil basket price reaching a record high, the government must formulate a long-term strategy to insulate the country against a possible ‘oil shock’, say industry players and energy experts.
The Indian crude oil basket Tuesday breached the $100-a-barrel mark for the first time leaving the experts concerned over ballooning oil prices and its repercussions on the economy.
“India should look at achieving higher energy efficiency instead of insulating oil consumers from price fluctuations in the face of high oil prices,” Oil and Natural Gas Corp (ONGC) Chairman R.S. Sharma said.
Speaking at a recent seminar on trends in oil and gas markets, Sharma said high oil prices are a trend rather than a cyclical phenomenon.
He emphasised that the government must adopt a twin strategy of adopting market price for consumers and intensifying domestic hydrocarbon exploration programme to ensure the country’s energy security is not endangered.
“While the existing fields are ageing and unable to increase production, new oil is mostly coming up from inhospitable deep water fields,” Sharma said.
“Producing and supplying oil from deep water fields is costly and increasing reliance on these sources for meeting the additional demand means higher prices,” he added.
He said subsidizing petrol and diesel was not a long-term solution.
Sharma said the government should have tax incentives for expediting exploration programme.
“The government should make fiscal terms of production sharing contract (PSC) more lucrative for new exploration licences considering the high oil prices,” he said.
U.D. Choubey, chairman of GAIL India Ltd, said the transportation sector accounted for 75 percent of India’s oil consumption.
“If we could replace petrol and diesel with compressed natural gas (CNG), we can save a lot on foreign exchange that goes into importing crude,” Choubey said.
Sanjay Kaul of the global consultancy firm Deloitte Touche told IANS: “This is the first time the Indian crude basket has breached $100 a barrel. Now it is imperative for the government to be decisive and treat it as a signal to take firm measures to reduce tariffs and find newer sources of energy.”