A draft of a new bill has been introduced in America, which may impact the international oil market and India’s imports. The purpose of this bill, supported by the late US Senator Lindsey Graham, is to limit Russia’s earnings from oil and gas. In this new draft, it has been proposed to impose 100 percent tax (tariff) on the top five countries of the world purchasing crude oil from Russia. India is among the big countries that buy oil from Russia, hence the Indian market is also keeping an eye on this bill. However, this bill is a slightly softer version of the earlier draft and leaves full scope for diplomatic negotiations.
How much will it affect India?
India fulfills about 88 percent of its total crude oil requirement by purchasing it from other countries. According to data from commodity analytics firm Kpler, in June this year, India purchased about 26 lakh barrels of crude oil daily from Russia. This accounts for more than half of India’s total imports. In fact, due to the ongoing tension in West Asia and the impact on supply through the Strait of Hormuz, Russian oil has become an important option for India. Sumit Ritolia, Refining Manager of Kepler, says that the continuous supply of Russian crude oil has helped Indian refineries to work at full capacity. Due to this, the availability of fuel in the domestic market remains without any interruption.
India has the option to negotiate
This new bill is quite different and practical from its earlier draft. In the earlier bill, there was a proposal to impose a tax of 500 percent on all Russian buyers. Now it has been reduced to a maximum of 100 percent only for the top-5 buyers. The most special thing about this bill is that in this the American President has been given the right to exempt any country from this tax if he wishes. Abu Dhabi energy analyst Natalia Katona believes that India can talk to America for this exemption. Since an important trade agreement is currently being negotiated between New Delhi and Washington, both the countries can try to find a practical solution to this issue.
What will be the impact on the international market?
Energy market experts are taking a fairly neutral view on the prospects of this bill becoming law and being implemented. At present, the price of Brent crude in the international market is above $85 per barrel. Experts believe that in such an environment, it will not be easy to suddenly remove millions of barrels of Russian oil from the global market, because doing so could lead to a rapid increase in crude oil prices across the world. Elections are also to be held in America later this year, and no government would want a huge jump in fuel prices before the voting. This is the reason why the provision of President’s rights and many types of exemptions has been added in the bill. Given these circumstances, it is expected that India will clearly put forward its energy needs and supply chain concerns to Washington.
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