India-Saudi Arabia Engagement on Energy and Security
Before Prime Minister's unexpected return to New Delhi from Riyadh due to the terrorist attack in Pahalgam, his visit to Saudi Arabia largely focused on security—including defence and energy.
Global Oil Market Dynamics
- India is working with Saudi Arabia to balance global oil market dynamics, reflecting a new compact among buyers and sellers to ensure stable energy supplies.
- OPEC+ is struggling to control supply as members cite national interest to continue oil production, making it geopolitically challenging to police overproduction.
- There is pressure from the US on the cartel to maintain low oil prices, as Western customers are less reliable due to climate commitments and large US reserves.
- Global trade disputes are expected to dampen oil demand further.
India's Oil Import Strategy
- India, as the world's third-largest oil importer, has seen a decline in OPEC oil imports owing to cheaper supplies from Russia.
- With its economic growth and rising energy intensity, India ensures stable and rising oil demand, aiding producers in planning output.
- India is at a critical juncture where it needs to harness all energy sources to accelerate growth and is negotiating with the US to rebalance bilateral trade, with energy imports as a potential adjustment mechanism.
- India's underinvestment in overseas oil prospecting and production makes it reliant on market mechanisms for stable and cost-effective supply.
Comparative Analysis with China
- Unlike India, China adopts a more aggressive stance by ensuring supply through strategic investment in upstream oil projects worldwide.
Transforming World Energy Market
- The energy market is rapidly transforming due to geopolitical realignments and the economic ascent of emerging economies.
- Within BRICS, India's unique position as neither a resource-rich nor a manufacturing-driven economy provides stability to oil markets seeking equilibrium.
- India now wields a significant voice in the energy market that demands recognition.