India calls for framework to check ’speculative’ oil trading

India has once again voiced its concern on volatility in international oil prices impacting developing economies and called for a regulatory mechanism to check “unhealthy speculative” trading.

In 2008, crude oil prices hit the roof in July when they touched USD 147 a barrel and then shaved off more than USD 100 within few months.

“The recent trend of rising oil prices is again threatening a renewed volatility, which is neither in interest of producing nor of consuming countries,” Minister of State for Petroleum and Natural Gas Jitin Prasada said addressing the ASEM Ministerial Conference on Energy Security in Brussels.

“Developing and emerging economies are particularly hard hit by this volatility, which adversely impacts their developmental activities and national economic plans,” he said in his speech, a copy of which was released by the ministry in New Delhi on Thursday.

Stating that high prices were unsustainable, he said: “We are confident that an appropriate regulatory mechanism will be put in place to check unhealthy speculative practices and bring about transparency to crude oil market.”
India imports 75 per cent of its oil needs, he said.

Prasad said the functioning of international oil and gas markets in a transparent manner is the most important. “Unfortunately, the global energy market is far from perfect and has in recent years been hugely susceptible to non-market considerations.”

“We strongly feel that the time is ripe for out-of-the-box solutions which can revitalize the global energy scenario. …last year, we advocated adoption of a price band mechanism to obviate crude price volatility,” he said.

He suggested that energy transport infrastructure like oil and gas pipelines should be financed by the international organizations like World Bank. Such initiative would be important in overcoming bilateral or regional complexities.

India also proposed that suppliers and buyers should enter into long-term sale and purchase agreements not only for the purpose of supplies but also for prices to bring stability in oil prices.

“Diversification of energy sources and of energy suppliers strengthens energy security. Renewable energy sources are the only truly sustainable sources of energy both in terms of their environmental impact and decreasing costs over the long term,” he added.