TOPIC OF THE DAY- Uncertain Times: On India’s Oil Imports
“India needs to diversify its oil supplier base and increase domestic sources of energy”
The oil market is in ferment once again with a great deal of uncertainty over supplies. On Monday the United States announced that it would not extend beyond May 1 the 180-day waiver it had granted to eight countries, including India, to purchase oil from Iran. This caused the price of Brent crude oil to witness a sudden jump to more than $75, from last week’s close of $71.97, as traders expected the withdrawal of the waivers to adversely affect the supply of oil in the market. The price of Brent crude, it is worth noting, has been rising steadily in the last few months, and has increased by almost 50% since it hit a low of about $50 in December, as a result of the decision of the Organisation of the Petroleum Exporting Countries (OPEC) to restrict their output to boost prices. India imports more than 10% of its crude oil from Iran, so the government faces the immediate challenge of having to find alternative suppliers to meet its huge energy needs. Even more worrying is the likely negative impact higher oil prices will have on India’s current account deficit, fiscal deficit and inflation in the wider economy. The current account deficit, which narrowed to 2.5% of GDP in the December quarter thanks to lower oil prices, will likely worsen going forward. The fiscal deficit, which has been widening in advance of the elections, is also likely to get increasingly out of control. While inflation is relatively benign at the moment, any further acceleration in price gains will tie the hands of the Reserve Bank of India. It may, however, be hard to say for sure that the jump in the price of oil this week, and over the last few months, marks a secular rise in the price of the commodity. The entry of U.S. shale producers into the oil market has put a lid on the price of oil as freely competing shale suppliers have been happy to increase their output whenever oil prices rise significantly. Even this week, the oil market has been torn between the news of the end to the waivers granted to oil imports from Iran and competing news of the increased supply of oil pouring into the market from the U.S. Higher oil prices also make it lucrative each time for members of OPEC to cheat on their commitments to restrict supply. If India is to protect its interests in the ever-volatile global oil market, the government will need to take steps to diversify its supplier base and also work towards increasing domestic sources of energy supplies. Opening up the renewable energy sector for more investments will also help avoid over-dependence on oil from the global market to meet the country’s ever-increasing energy needs.
MEANINGS AND WORDS
- Ferment
Meaning: agitation and excitement among a group of people, typically concerning major change and leading to trouble or violence.
Synonyms: fever, furore, frenzy
Antonyms: Calm, Happiness
Example Sentence: “a period of political and religious ferment”
- uncertainty
Meaning: the state of being uncertain.
Synonyms: unpredictability, unreliability, riskiness
Antonyms: certainty, predictability, confidence
Example Sentence: “times of uncertainty and danger”
- extend
Meaning: cause to cover a wider area; make larger.
Synonyms: expand, enlarge, increase
Antonyms: reduce, shrink, narrow
Example Sentence: “the car park has been extended”
- witness
Meaning: a person who sees an event, typically a crime or accident, take place.
Synonyms: observer, onlooker, looker-on
Example Sentence: “police are appealing for witnesses to the accident”
- withdrawal
Meaning: the action of withdrawing something.
Synonyms: removal, taking away; abolition
Antonyms: introduction
Example Sentence: “the withdrawal of state subsidies”
- waivers
Meaning: an act or instance of waiving a right or claim.
Synonyms: renunciation, surrender, repudiation, rejection
Example Sentence: “their acquiescence could amount to a waiver”
- adversely
Meaning: in a way that prevents success or development; harmfully or unfavourably.
Synonyms: Negatively, resentfully
Example Sentence: “his self-confidence was adversely affected for years to come”
- restrict
Meaning: put a limit on; keep under control.
Synonyms: limit, set/impose limits on
Antonyms: Aid, Allow, Assist
Example Sentence: “a busy working life restricted his leisure activities”
- alternative
Meaning: (of one or more things) available as another possibility or choice.
Synonyms: different, other, another
Example Sentence: “an alternative route”
- impact
Meaning: a marked effect or influence.
Synonyms: effect, influence, impression, footprint
Antonyms: Failure, Loss, Avoidance
Example Sentence: “our regional measures have had a significant impact on unemployment”
- deficit
Meaning: the amount by which something, especially a sum of money, is too small.
Synonyms: shortfall, deficiency, shortage
Antonyms: surplus, profit
Example Sentence: “an annual operating deficit”
- worsen
Meaning: make or become worse.
Synonyms: aggravate, exacerbate
Antonyms: improve, ameliorate, recover
Example Sentence: “her condition worsened on the flight”
- benign
Meaning: gentle and kind.
Synonyms: kindly, kind, warm-hearted
Antonyms: Harsh, Unkind, Rough
Example Sentence: “his benign but firm manner”
- acceleration
Meaning: increase in speed or rate.
Synonyms: hastening, speeding up, quickening, stepping up, advancement
Antonyms: Slowing, Deferral, Deceleration
Example Sentence: “the acceleration of the industrialization process”
- gains
Meaning: an increase in wealth or resources.
Synonyms: profit, earnings, income
Antonyms: loss
Example Sentence: “the pursuit of personal gain”
- secular
Meaning: (of a fluctuation or trend) occurring or persisting over an indefinitely long period.
Synonyms: Lay, earthly
Example Sentence: over the last few months, marks a secular rise in the price of the commodity.
- shale
Meaning: soft finely stratified sedimentary rock that formed from consolidated mud or clay and can be split easily into fragile plates.
- torn between
Meaning: be in a state of uncertainty between two conflicting options or parties.
Synonyms: torment, torture, rack, harrow
Example Sentence: “he was torn between his duty and his better instincts”
- lucrative
Meaning: producing a great deal of profit.
Synonyms: profitable, profit-making, gainful
Antonyms: unprofitable
Example Sentence: “a lucrative career as a stand-up comedian”
- diversify
Meaning: enlarge or vary the range of products or the field of operation of (a business).
Synonyms: branch out, vary output, expand
Antonyms: Continue, Keep, Remain
Example Sentence: “we’re confident that the new owners will grow and diversify the company globally”
