New Delhi: India should utilise the opportunity created by the historic crash in global crude prices for building its own strategic reserve to prepare the country to deal with any supply shock in future, said SC Tripathi, former petroleum secretary.
On Monday, due to a combination of several factors, the benchmark US crude price, also known as West Texas Intermediate (WTI) turned negative for the first time in the history. The WTI price for May delivery crashed to -36.73 US dollar a barrel. And for June delivery, WTI traded at around $20 a barrel.
In order to avoid hefty transportation and storage costs, traders were willing to pay to buyers as the supply of crude oil has vastly outstripped the demand world over, namely due to the lockdown and unprecedented restrictions on trade and travel.
Though the US benchmark WTI traded in negative, the Brent Crude, the benchmark used by India for procuring its crude requirement, was trading little over $25 a barrel for June delivery.
Petroleum sector experts like SC Tripathi believe that the country should take advantage of this highly beneficial situation to build its own strategic reserve to deal with any supply shock in future.
He said India needs a strategic reserve of at least 30 million tonnes in addition to its commercial storage available with oil refineries and marketing companies.
Read more:Oil price collapse in US not to lead to any big drop in fuel prices in India
“Unfortunately, India is not able to build its strategic reserve,” SC Tripathi told ETV Bharat.
Indian Strategic Petroleum Reserves Limited (ISPRL), has three strategic reserves at Padur and Mangalore in Karnataka and near Visakhapatnam in Andhra Pradesh. The total installed capacity of these strategic reserves is around 5.33 million tonne, equal to 10 days of requirement.
Two more facilities, one 4.5 million tonne facility in Chandikhol, Odisha and another 1.5 million tonne storage facility in Padur, Karnataka is under construction.
“Creation of crude oil storage facilities is not easy, it is being created in underground caverns,” said the former bureaucrat.
He said India should follow the path chosen by the US President Donald Trump who has decided to further build the strategic reserve of his country.
The USA has the world's largest crude oil storage facility known as the Strategic Petroleum Reserve or SPR, capable of holding over 700 million barrels of crude oil.
In his daily COVID press briefing, US President Donald Trump announced his intention to seek approval of the Congress for purchasing additional 75 million barrels of crude oil.
"This is a great time to buy oil...Nobody's ever heard of negative oil before," said the US leader.
