Oil company dollar demand soars 45% on high crude, RBI raises credit limit
Executives at state-run oil refiners said their dollar requirements increased sequentially by about 40-45% in the first half compared to the second half of 2021, but declined to share numbers.
They eased fears of a dollar shortage, saying that in addition to revolving credit for buying rough, companies also have limits available under an additional dollar window opened in 2018 for spending. in capital.
Leaders said an increase in fuel demand amid high oil prices has added to their foreign currency needs. “We are buying more barrels to supply the market. We also imported diesel to meet a peak in demand in June. At today’s high prices, it takes more dollars to pay for them than six months ago,” said an industry executive, speaking on condition of anonymity.
In 2021-2022, oil companies spent $144 billion to import around 212 million tonnes (mt) of crude and 40 mt of products. Oil prices have been rising since October 2021, but soared after the outbreak of the Russian-Ukrainian conflict on February 24, hitting a 14-year high of $139 a barrel on March 7. The price hovers around $107.
Data from the Ministry of Petroleum shows a 17.9% growth in overall product demand. By segment, gasoline consumption increased by almost 23%, diesel by 24% and jet fuel by almost 130% compared to a year ago.
Rising demand makes India vulnerable to high oil prices as the country meets 85% of its crude needs through imports. High oil prices weaken the rupee by draining the forex pool as more Indian currency is needed to buy every dollar.
As the rupee weakens, imports of raw materials become more expensive. This impacts India Inc’s profitability by increasing production costs, leading to higher inflation as goods and services become more expensive and making finances more difficult for the aam-admi.
India is the world’s third largest consumer of oil and is expected to be a major driver of additional demand through 2030, with consumption growing at 5-6% per year.