Amid rising oil prices across the world, US president Joe Biden decided to release oil from the petroleum reserves in the country and make an announcement about it as early as Tuesday.
Reuters has reported that the US has also reached out to India, Japan and other major oil consumers to release oil from their strategic petroleum reserves to bring down rising crude oil prices. China and South Korea are also likely to release oil from their national reserves in coordination with US, India and Japan.
Even as there was talk around the US, Japan and India releasing their crude reserves, oil prices saw a dip on Tuesday. Biden's decision to release crude oil from the reserves comes at a time that he faces a fall in his approval ratings.
Amid talk of India also releasing oil from its petroleum reserves, here’s a look at what we know about it.
Why does India have strategic petroleum reserves?
The strategic petroleum reserves in India were set up to ensure that there is oil security in case of global scarcity. India is the third-largest importer of crude oil in the world. This reserve serves as a buffer for the country and is in addition to the storage of crude oil companies in the country.
The oil stored in these reserves can only be used in times of crisis and with a nod from the Indian government.
Where are such reserves located?
India’s strategic crude oil storages are located in underground rock caverns of Visakhapatnam in Andhra Pradesh, and Mangalore and Padur in Karnataka. The locations are in the coastal areas of India and are at points from which they can easily be taken to refineries.
A fourth one is under construction in Chandikhol in Odisha.
Who takes care of the reserves?
The Indian Strategic Petroleum Reserves Limited manages the reserves and also the new reserves under construction. It is a subsidiary of the Oil Industry Development Board, which falls under the Ministry of Petroleum and Natural Gas.
The one in Vishakhapatnam has a capacity of 1.33 million tonnes, the one in Mangalore has a capacity of 1.5 million tonnes, the one is Padur has a capacity of 2.5 million tonnes and an additional 2.5 million tonnes is being constructed. The Chandikhol reserve has a capacity of 4 million tonnes. The total capacity of the three already functional locations are that of 5 million metric tons.
A capacity of 5.33 metric tonnes of crude oil is maintained in these reserves and adds up to 9.5 days of consumption.
Why were these set up?
Atal Behari Vajpayee’s government suggested setting up oil reserves as a long term solution to any global crisis that could affect India. This was after the Gulf War in West Asia in the 1990s sent oil prices soaring, affecting India’s import bills and pushing India into a crisis.
A year later, in 1991, because of its own economic crisis, India’s foreign exchange reserves had depleted and India could only afford three weeks of import. While the crisis was averted then, the reserves were a step to curb future crises arising out of the oil market.
In 2018, the Narendra Modi government approved the second phase of the reserves being built in Odisha and Padur in Karnataka.