Saudi oil facility attack: India’s plans for economic revival could be hindered as the hub of Saudi Arabia’s oil industry had been targeted by a lethal drone attack over the weekend.
Several drone attacks on the weekend resulted in a fire at two main services run by state-owned Saudi Aramco. This is one of the topmost oil and gas refineries all across the world. This attack has created panic among worldwide traders who panic a huge increase in oil prices.
Houthi rebels of Yemen have launched these drone attacks on Saudi Aramco’s Abqaiq and Khurais plants. These attacks have reduced Saudi Arabia’s overall oil production by 5.7 million barrels every day (BPD). That is almost 5% of the world’s entire crude oil supply and half of the oil production of Saudi. The biggest-ever surge has been noticed in the last 30 years, as the global standard Brent Crude rose almost 20 percent.
A limit on Saudi’s oil exports for some weeks could disturb India’s road to economic recovery as Monday’s shock plunge extensively increased oil prices. Boost in international crude oil prices is expected as the oil supplies of Saudi Arabia have been limited due to the attack on one of its biggest oil refineries.
India is a big importer of oil from Saudi Arabia. A boost in the prices is the last thing the Indian government would want, particularly at a time when India’s economic growth is experiencing major slowdown
India fulfills 80 percent of its oil needs through import. India’s second-largest oil supplier of crude and cooking gas is Saudi Arabia
India’s reliance on oil has augmented regularly since 2017 as per the Data of the oil ministry’s Petroleum Planning and Analysis (PPAC). Total oil consumption of India reached to 211.6 million tons in the period of 2018-19.
In contrast, domestic crude production of India is continuously falling. In 2016-17, India’s Crude production reduced to 36 million tonnes than 36.9 million tonnes in 2015-16. India’s crude production dropped to 34.2 million in the financial year 2019. Singapore’s DBS Banking Group estimated that Saudi Aramco drones attacks are may strike India’s oil import bill
“A10 percent increase in international crude costs will extend India’s current account deficit by 0.4-0.5 percent of the GDP”, according to DBS Chief Economist for G3 and Asia Taimur Baig. He said every dollar shift in the Brent Crude prices adds about $2 billion to the oil import bill of India. India spent $111.9 billion to pay off oil import bills in 2018-19.
India has been left exposed to any hike in international oil prices as India fulfills nearly 80 percent of its crude oil needs through import. He said, “Indian Rupee would be amongst those currencies that would suffer due to huge import bill”.