It's the sovereign right of the Organization of Petroleum Exporting Countries to decide on the oil production capacities, Union Minister of Petroleum and Natural Gas Hardeep Singh Puri said Friday.
Refraining from commenting on the controversial decision of OPEC on cutting oil production by two million barrels a day, which has taken the world by surprise, Puri said it is likely to be scrutinized very carefully.
During an interaction with a group of Indian reporters, he said that India as one of the major consumers of oil and gas also has a major say in the global oil market.
"India is not a part of OPEC. India is at the receiving end of OPEC decisions...,” he said in response to a question.
“I have always traditionally taken the view, it is their sovereign right to decide what they wish to do, how much oil they want to produce and how much they want to put into the market,” Puri said when asked about the decision of OPEC countries to cut oil production.
“But I always say that all of this is subject to the doctrine of consequences intended and unintended,” he said.
“That's why I'm deliberately exercising not just calm, but also restraint in commenting on what has happened, because I'm told that there were assurances given, don't ask me whom, etc., that in fact they were not planning to do this,” Puri said.
“In our interaction with the oil price producers in the grouping that you call OPEC, or OPEC, plus, our understanding, my understanding, based on what we were told last year that this was a temporary adjustment and what you would see is that by February the amount of crude which is released into the market would be sufficient to cater to the increasing demand,” Puri said.
Obviously from March 2020, when the global economy was in a virtual lockdown state there has been a calibrated opening. But now most of the economies are slowly firing on all cylinders, and therefore there's an increase in demand, he said.
But the fact of the matter is that large parts of the world today are either in recession or are experiencing conditions (like) recession, he added.
Observing that OPEC's decisions have been widely commented upon, both here and in other parts of the world, he said, “How much of the proposed 2 million barrels which has been curtailed absorbs less production earlier and how much are going to be fresh cuts is something that will be very carefully studied."
The market was already preparing for having a million barrels cut.
So, the announcement of a two-million-barrel cuts, has taken large parts of the world by some surprise and questions are bring asked because it stands to reason if there is a large shortfall in the amounts of energy which are released into the global market, then prices will escalate, the minister said.
And prices escalating would in turn exacerbate the movement towards recession which in turn will lead to loss of demand.
“So, it becomes a vicious cycle."
"Whether that has been fully taken into account or not, it's not for me to comment on the decision has been taken.
"But I believe that all decisions which are taken and which have global ramifications have both intended and unintended consequences. How these play out we will see,” he said.