*Russian crude oil: Passing on the oil tax giveaway parcel – The Economic Times

Clipped from: https://economictimes.indiatimes.com/opinion/et-editorial/passing-on-the-oil-tax-giveaway-parcel/articleshow/92638926.cms

Synopsis

​​​Domestic crude oil producers, which supply around 15% of the demand, have been realising better prices since the Ukraine conflict broke out. Petroleum product exporters, likewise, face buoyant demand as Europe weans itself off Russian energy. Discounted Russian crude is widening refining margins. This has led to a surge in imports from that nation.

GoI has passed on a major chunk of recent tax giveaways on retail fuel sales to producers and refined exports of crude oil. Last week’s windfall tax on upstream oil producers and duty on sales abroad of petrol, diesel and jet fuel should also take some pressure off the rupee, which is plumbing new depths every week as India’s energy import bill bloats.

Domestic crude oil producers, which supply around 15% of the demand, have been realising better prices since the Ukraine conflict broke out. Petroleum product exporters, likewise, face buoyant demand as Europe weans itself off Russian energy. Discounted Russian crude is widening refining margins. This has led to a surge in imports from that nation.

The export duties on petro products accompany commitments by refiners that they are matching outbound shipments with supply to the domestic market. This follows a previous move granting freedom to crude oil producers to market their produce, in a signal to increase output. GoI is trying to cushion, to the extent possible, the Indian consumer from an energy supply shock. It joins a growing list of countries that have taxed, or are in the process of taxing, windfall gains by the oil industry. In this, the world at large is turning its back on the market’s ability to balance demand and supply through prices. In the case of energy-deficient India, the scope for intervention is limited to the value added in refining and the little oil it pumps out.

The global supply response to a Western blockade of Russian energy has not been encouraging. Other energy-producing nations are not in a position to immediately increase output, and the rest of the world cannot match Russia in natural gas capacity. For now, the blockade is partial with Russian crude oil finding a market in Asia. China, the other big buyer of Russian oil, does not face India’s constraints in securing foreign exchange cover for its energy imports. Export restrictions could also keep India ahead of a possible tightening of sanctions that may extend to shipping oil from Russia.

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