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  • High Fuel Prices: Does the End Justify the Means?

    The contentious discourse in the media ignores the implications of state taxes on rising fuel prices.

    September 27, 2017

    Saudi Aramco’s IPO

    If India gets a stake in the proposed Aramco IPO, it would mean getting a share of profits from one of the world’s largest and most profitable companies.

    July 13, 2017

    Trump’s Energy Plan – More Volatility for Oil Geopolitics

    Although President-elect Trump has declared his intention to deregulate the fossil fuel sector in order to make America less energy import dependent, but over time, this will lead to an increase in supplies in an already over-supplied oil (and gas) market and send prices into a further downward spiral.

    December 05, 2016

    The Oil Market Challenge

    Over the last few years, it has been a roller coaster ride for the oil markets. From $110 a barrel in 2010, prices began dropping from June 2014 and finally dropped to below $30 a barrel in January 2016. Then from the end of the first quarter of 2016, prices started recovering and have been hovering around $50 a barrel since May

    September 2016

    Impact of Iran’s Return for the Oil Market and India

    As was anticipated, the nuclear sanctions imposed against Iran were finally lifted on January 16, 2016 after it was certified by the International Atomic Energy Agency (IAEA) that Iran had met its obligations under the Joint Comprehensive Plan of Action (JCPOA) reached in July 2015 among six world powers.

    May 2016

    What does lower oil prices mean for India?

    What does lower oil prices mean for India?

    The longer the price of oil remains depressed, India, like other major oil importers, will not only increase its dependence on crude imports, but it will also become more dependent on OPEC.

    January 18, 2016

    Harish Srinivasan asked: Growth of ISIS poses a severe threat to oil supplies from Iraq. What should be India's approach to ensure energy supplies from Iraq?

    Shebonti Ray Dadwal replies: ISIS has lost control over major oil fields in Iraq since mid-2015, and although it still controls some parts of Iraq, the oil trade in eastern Syria is now one of the only means it can make money from oil. The main oil-producing regions of Iraq are still under the control of Baghdad and despite security and financial problems the crude production has grown substantially over the last five years, reaching 4.4 mbd in the third quarter of 2015 as against 2 mbd earlier.

    Need to revive Iran-India energy ties

    Need to revive Iran-India energy ties

    The possible lifting of the sanctions on Iran will lead to a rush for a share of the lucrative Iranian energy pie similar to Myanmar’s opening up last year. India cannot afford to be left behind.

    September 30, 2014

    Iraq crisis: Lessons for India

    Given India’s vulnerability to a rise in global crude oil prices as a result of its 75-80 per cent of its crude import dependency, the Iraq crisis could widen its current account deficit, while putting pressure on exchange rate, impeding government’s fiscal consolidation goal and putting off any nudge on interest rates by the Reserve Bank of India.

    July 16, 2014

    Manoj Kumar Meena asked: As the US is increasingly becoming self reliant in oil and gas, why does it still ally with a theocratic regime in Saudi Arabia?

    Rumel Dahiya replies: It is true that the US is approaching a stage of energy self sufficiency. In fact, it would be in a position to export LNG to its favoured trade partners once the infrastructure is in place. Availability of cheap gas domestically is creating a competitive edge for America's manufacturing sector and an influential section of the American society would like to retain that edge by restricting exports. It is axiomatic, therefore, that in the changed situation the importance of West Asia (or the Middle East) in America's energy security matrix will reduce greatly. Some analysts opine that America's involvement in the geopolitics of the West Asian region as a whole would decline. However, a superpower would always like to retain influence and maintain leverages all across the world. Being a region with the largest exportable surplus of oil and gas, the region as a whole is bound to remain strategically important to the world, even if not to the US.

    With its ability to increase oil production at short notice and financial capacity to reduce production without serious damage to its economy, Saudi Arabia remains a significant and perhaps the most important energy player in the world. Also, being the richest and most influential country in the region, ready to financially help out regimes from Egypt to Pakistan and beyond, it can not be ignored easily. This is so even when it does not shy away from promoting fundamentalist Wahabism across the world. America's liberal democracy and pluralism and Saudi Arabia's hardline sectarian theocracy do not make for easy partnership. However, their relationship has always been interest driven. US has looked at close engagement with Saudi Arabia in terms of maintaining its influence in the region, controlling and securing energy resources for itself and its allies and to serving its geopolitical interests besides furthering its economic interests in terms of trade and commerce. Saudi Arabia, on the other hand, looked at the US as a guarantor of its security, particularly from Iran after the Iranian Revolution, and supporter of its ambitions for regional hegemony.

    The situation is now changing primarily because of two reasons. America's energy independence is perhaps the most important reason. US is also realising that Saudi obsession with Iran is constricting American choices in the region. This issue has gained salience with much reduced American appetite for military interventions abroad for economic and political reasons. Increased focus on East and South East Asia will necessitate a degree of disengagement from elsewhere. West Asia is one such region wherein various players like Saudi Arabia, Egypt, Israel and Turkey continue to place heavy demands on American political capital and security apparatus. By not getting directly involved in Syria and initiating talks with Iran on the nuclear issue, America has signalled change in its approach. This, however, does not mean that America will disengage with the region or affect a break with Saudi Arabia. America may not need West Asian oil and gas but some of its allies do. It would also not like to see its peer competitor(s) to fill the vacuum once it vacates the geopolitical space. It would also be necessary for the US to maintain a degree of influence with all important states in the region so that it remains an indispensable balancer for the region. The US-Saudi relationship is likely to cool down considerably in next decade or so but it is unlikely to turn into hostility. US is likely to follow a more nuanced and balanced policy for the region to create a new regional balance of power wherein it would be able to exercise influence but not be a guarantor.

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