Can Oil Prices Hit $100 Again?

[00:00:00]Hello and welcome. You're watching BT TV. This is Aastha Chopra and today we are at S&P Global Energy event. For that, for more information, we have a very special guest with us, Mr. Premasish Das, who is the executive director of S&P Global and heads the research and analysis of oil markets.

[00:00:15]Thank you so much, Mr. Das, for speaking to us. Uh we saw your keynote and it was very amazing. Let's start with a very basic question about the oil oil markets as well. So, are the oil markets today more resilient to the geopolitical tensions which are happening or is it like stable as always?

[00:00:34]>> I think I mean if I think back maybe 20 years back, I think from the from that point, I think market is more resilient for basically two reasons. One part is there are more supplies was already there. I mean if you recall like before this war happened, I mean we were talking about a market like there's a significant surplus of oil. So, essentially that was the kind of situation where we were we were because of more supply was there. And also another factor is that demand or demand growth has been slowing down particularly for the key refined products like gasoline, diesel. So, with all that actually, so if I look into that market as such, I think market has more shock-absorbing capability now compared to maybe 20 years down the road. And one of the key difference I would say is the US situation. US used to be a importer, now they're a huge exporter of energy. So, and in the meantime, I think China, India, their uh demand has increased, their requirement of increase, but I think still um still I think uh overall, I think the balance looks to be a lot easier compared to that time. So, I think yes, I mean if I look into pure fundamentals particularly coming to this part of this um session, I mean this part of this uh this disruption >> [snorts] >> I think we are we are in a better position and that is the reason I think some of the shocks which could have been much worse we did not experience that.

[00:02:11]>> Absolutely. So, one thing I want to understand, there was a lot of tension if you talk about only India. There was uh fear of being locked down. What do you think that India will face a double inflation if the oil prices spark uh more in coming days?

[00:02:28]>> Yeah, I mean, first thing is so far the developments are kind of favorable in that sense. I mean, so if this MOU which has been signed, so hopefully uh next 60 days uh there that uh discussion if that is successful, I think chances of high oil price will be lot less uh than otherwise. So, from that angle I guess uh uh India may not see that uh high price, but yes, always there is a possibility because here we are talking of a uh two countries who have been in kind of fight uh at least mentally fighting each other for almost 50 years.

[00:03:09]>> it's unpredictable.

[00:03:10]>> Yeah, so so we don't know like how these discussions will take shape. Uh but yeah, I mean, that is what uh uh I mean, if that thing really breaks down actually, I mean, there could be a possibility that price can go up very high. And more so because I think first half of the last three and a half months actually world has consumed lot of the buffers already.

[00:03:33]Means if there is a breakdown happens right now, I think the amount of buffer left is much less.

[00:03:38]So, possibility of a spike on the oil price could be lot more.

[00:03:43]>> That's true. That's true. That that was my second question. According to the data, of course. So, what is the bigger risk to oil markets right now? Is the deal Is it the geopolitical tensions or like slowing the global economy growth?

[00:03:55]Uh what is it?

[00:03:57]>> Uh I think the bigger challenge in my mind is still geopolitics. I think uh the clarity has to be there like what is happening. I mean, I think inflation definitely is a consideration. I was reading like yesterday I think the Fed discussion they're now talking about in- increase of interest rate versus reduction. We are talking about reduction in the start of the year.

[00:04:20]>> Mhm.

[00:04:21]>> Now they're talking of if the interest rate is increasing, essentially that means that the there's they are feeling the inflationary pressure there too.

[00:04:29]So that is definitely not a good sign like when the interest rates are high, that means the challenges for the economies are are will be a lot more. So I think but again both of the things are kind of related like because of the economic sorry, the geopolitical developments I think economic activity could be impacted like what has happened >> Absolutely.

[00:04:54]>> in last 3 months. Like it is a pure geopolitical driven >> Yeah.

[00:04:58]>> kind of drawdown in the so-called economic activities that they want. So yeah, I mean they are related I but geopolitics is always top of the thing because that can drive a lot of stuff from in which is under our outside men lot of people's control.

[00:05:11]>> And what do you think about the OPEC's influence on oil?

[00:05:14]>> I think I mean if this right now obviously OPEC has very limited uh limited capability to do anything because of the set of hormones is closed, right? So once the set of hormones is open, I think then OPEC's action will be important. I think OPEC was kind of showing the intent to increase their production.

[00:05:38]So that is if they continue that up case that is going to help on the short term.

[00:05:42]But on the longer term actually that could be a challenge for OPEC as well because now UAE is outside the OPEC umbrella. So, if UAE is increasing production and others all others increasing production, so at some point of time OPEC has to see like how the price impact versus how what how they want to kind of balance the market. So, but again, having said that, I mean, if I look into our balances, I don't see that that is coming anytime like next 6 to 12 months. I think market will be still tight. I mean, we think. And so with that, I think OPEC definitely will try to increase production which will be helpful for the market.

[00:06:27]>> So, what if the barrel turns again at $100 per barrel? So, what will be the consequences? Like, should we be ready for that or it's like are we seeing an ease on that?

[00:06:38]>> No, I think that I mean, as as a country, I think India is a huge importer of crude oil, right? So, from that angle, like if uh if the oil price is high, that means there's a huge drawdown on our essentially in terms of the foreign reserves and and the economy itself. Actually, inflation could be much higher. So, high oil price is always a challenge and and although as I'm saying like there's a bit of positivity right now because of all these deals and signing, but I think we should be prepared. Always there could be a challenge that the price could be at higher level. And so that means essentially the I mean, obviously government cannot, I think in my mind, will continuously kind of shield the consumers.

[00:07:33]So, at some some extent to some extent government has to kind of pass that some of the cost to the consumers.

[00:07:41]And that could be a challenge for the consumers so as you can think of like it is essentially could be inflationary, could be challenging.

[00:07:49]Mhm. But if there is a high oil price, I don't think anything else can be done because we are not a huge producers. India is not a huge producer of oil.

[00:08:01]So and we are dependent significantly 90% of our crude is imported.

[00:08:07]So we have limited control. Only thing but from this this disruption, I think one thing we learned, I guess, is essentially how to perhaps what are the things we need to do differently to at least There are two shocks that typically generally one is price shock, another is volume shock actually. So I I think the volume part we can control, price part we cannot control possibly. But the volumes part, I think we can plan properly essentially particularly the inventories, how you want to manage inventory, how you want to diversify our feed stock or crude crude sources, how we want to kind of set up our operating companies like trading, how we want to be involved in the trading activities, how we kind of look into our refineries and kind of do some I mean increase their flexibility so that they can process different type of crude. All those things in our hand actually in a way. So so I think we should do what we can do and focus on that. But price part is pretty much international. You never know what can happen which is definitely not India's control.

[00:09:15]>> Absolutely. We have to work on the solutions and just pray that this unpredictability ends [laughter] soon.

[00:09:20]That though that's the only thing we can do right now. But yeah, you gave us a very clear picture of what's going to happen and what's what will be the consequences. My sir, sir, thank you so much Mr. Das for speaking to us. It was a pleasure to have you on our channel.

[00:09:32]Thank you so much. Thank you.

[00:09:34]>> Thank you. Thank you.

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