High oil prices hurting global economic growth

​New Delhi: Prime Minister Narendra Modi on Monday warned oil producers such as Saudi Arabia that high crude prices were hurting the global economy and sought a review of payment terms to provide temporary relief to the local currency.

India, the world's third-biggest oil consumer, has been battered by high crude oil prices over the past two months that have sent retail petrol, diesel and LPG rates to record high, posed inflationary risks and together with a sliding rupee threatened to upset its current account deficit. Also, unrelenting fuel price rise since mid-August has negated cut in taxes and subsidy.

With Saudi Arabia oil minister Khalid A Al-Falih and a UAE minister listening, Modi, at his third annual brainstorming with the chief executives of top global and Indian oil and gas companies, underscored how crude oil prices at a four-year high were hurting global growth.

Sources privy to the deliberations said Modi also asked chief executives why no new investments in oil and gas exploration and production were coming to India despite the government implementing all the suggestions they made at the previous such meeting, sources said. An official statement issued after the meeting said Modi noted that "the oil market is producer driven and both the quantity and prices are determined by the oil-producing countries".  

"Though there is enough production, the unique features of marketing in the oil sector have pushed up the oil prices," it said quoting the Prime Minister. Consuming countries, he said, face economic challenges such as serious resource crunch due to rising crude oil prices. He made a strong case for a partnership between the producers and consumers in the oil market as it exists in other markets. "This will help stabilise the global economy which is on the path of recovery," he said.

The Indian rupee has fallen 14.5 per cent this year, making imports costlier. The country is over 83 per cent dependent on imports to meet its oil needs. Later speaking at the India Energy Forum, Saudi Oil Minister said Modi at the meeting raised the issue of "consumer pain" from high crude oil prices. "We heard it today loud and clear from prime minister (about consumer pain)," Al-Falih said. He, however, said the "pain" would have been "much louder" but action by Saudi Arabia, the world's largest exporter of oil, to invest in creating spare capacity has used to cushion price shocks. 

"Prime minister cautioned producers like me not to kill the hen that lays the golden egg," he said, referring to consumers as the golden hen. Speaking at the same conference, Oil Minister Dharmendra Pradhan said India is "facing severe headwinds from rising oil prices" which have risen by 50 per cent in dollar terms and 70 per cent in rupee term in the last one year.