Brazil’s president mulls scrapping Petrobras market-based fuel pricing -source
Brazil’s President Michel Temer may scrap a market-based pricing mechanism used by state-run oil firm Petrobras and revert to selling all fuel below costs after a trucking strike that almost paralyzed the nation, a government source told Reuters on Tuesday. Talk of temporarily lowering prices on just diesel to end the havoc the nine-day strike brought on Latin America’s largest economy sent Petrobras shares plunging 15 percent on Monday. Truckers are protesting a 50 percent increase in diesel prices under the two-year-old Petrobras policy of almost daily adjustments following international prices. The source, who asked not to be named because he was not authorized to speak publicly on the matter, said the pricing policy worked well when oil prices held steady for years at $40-50 a barrel, and the Brazilian currency remained stable against the dollar. But oil has recently surged to $70-80 a barrel boosted by plummeting Venezuelan production, strong global demand and looming U.S. sanctions on Iran. Meanwhile Brazil’s currency has weakened 11 percent this year on political uncertainty. “Without that (stability), we have a problem. We need to study alternatives,” the official said. He said talks on the issue have already begun between the government and Petrobras. A spokeswoman for Petrobras chief executive officer Pedro Parente declined to comment. Temer acknowledged in a television interview on Tuesday that he was open to reviewing the pricing policy. “Petrobras has recovered in these two years. It had been in a disastrous situation for a long time, and we did not want to change the company’s policy,” Temer told government broadcaster TV Brasil. “We can re-examine the policy, though with great care.” On Sunday, moving to settle the truckers strike, Temer announced tax cuts and subsidies to reduce domestic diesel prices by 0.46 real per liter, or about 13 percent of the current price at the pump, freezing them at that level for 60 days. The prospect of government interference in Petrobras pricing policy sent its share prices plummeting on Monday. That slide added to losses a week earlier that reduced the stock price by nearly one third, though shares rebounded 14 percent on Tuesday to close at 19.30 reais. The government official said initial talks had begun between Mines and Energy Minister Moreira Franco and Parente, architect of the company’s recovery. Parente has resisted change, but has appreciated the need for greater predictability in price adjustments, the official said. Dustin Brown Womens Jersey
Fuel price hike: Farmers protesting diesel rates hand over tractor keys to officials
Thousands of farmers drove down to the office of the local authorities in Samrala, Ludhiana to hand over the keys of their tractors as part of a unique protest against the rising diesel prices. Organised by the Bharatiya Kisan Union (Rajewal), the protesters alleged apathy on the part of the central government claiming that the incessant fuel price hikes were only adding to the woes of the debt-ridden farmers. “The price of diesel, which is an important input cost of cultivation, has risen so sharply that it has gone out of the reach of the farmers,” BKU (Rajewal) chief Balbir Singh Rajewal said. “The increase in the diesel prices has come at a time when paddy sowing is going to start next month. As per rough estimates, the rise in the fuel rates will put an additional burden of Rs 400-600 per hour for ploughing operations,” he claimed. The livid farmers blamed the high fuel prices for agricultural activities getting severely affected. “It has become unviable to carry out farming activities because of the fuel price hikes. We have come here on our tractors to hand over the keys to the district administration as we cannot afford to use them,” a farmer lamented. As hundreds of tractors converged on the Chandigarh-Ludhiana road in Samrala, the commuters had a harrowing time, while the administration scrambled to manage the massive traffic snarl. Corey Davis Authentic Jersey
U.S. record oil exports bite into Russia, OPEC market share in Asia
Record crude oil volumes exported from the United States will be heading to Asia in the next couple of months to take another piece of the market away from Russia and producers in the Organization of the Petroleum Exporting Countries (OPEC). The United States is set to export 2.3 million barrels per day (bpd) in June, of which 1.3 million bpd will head to Asia, estimated a senior executive with a key U.S. oil exporters. Data from the Energy Information Administration shows U.S. oil exports peaked at 2.6 million bpd two weeks ago. The record outbound volumes come as U.S. crude production hit all-time highs, depressing U.S. prices to discounts of more than $9 a barrel below Brent crude futures on Monday, the widest in more than three years and opening an arbitrage for excess supplies to other markets. The difference in the key benchmarks was a chance for Asian refiners to reduce light crude imports from the Middle East and Russia after Brent and Gulf prices touched multi-year highs, traders in Asia said. “We’re diversifying a lot to other regions. If Saudi Aramco still doesn’t reduce prices next month and ADNOC (Abu Dhabi National Oil Company) follows, we will increase our U.S. crude purchases,” a Southeast Asian oil buyer said. CHINA BUYS AMERICAN In Asia, China – led by Sinopec, the region’s largest refiner – is the biggest lifter of U.S. crude. The company, after cutting Saudi imports, has bought a record 16 million barrels (533,000 bpd) of U.S. crude, to load in June, two sources with knowledge of the matter said. India and South Korea are the next biggest buyers in Asia, each lifting 6 million to 7 million barrels in June, sources tracking U.S. crude sales to Asia said. Indian Oil Corp bought 3 million barrels earlier this month via a tender, while Reliance Industries purchased up to 8 million barrels, the sources said, although it wasn’t clear if Reliance’s cargoes would all load in June. The sources declined to be named due to company policies. South Korea’s purchases are driven by its top refiners SK Energy and GS Caltex. Taiwanese state refiner CPC Corp has also snapped up 7 million barrels to be lifted in June and July. U.S. exports to Thailand will increase to at least 2 million barrels. State oil company PTT PCL is 1 million barrels of WTI Midland, while Thai Oil and Esso Thailand bought at least 500,000 barrels of Bakken crude each, said traders with knowledge of the country’s crude deals. Reliance declined to comment. PTT, Thai Oil and Esso Thailand all did not respond to requests for comment. But even if Asia and Europe are keen to take more U.S. crude, the record volumes are straining export infrastructure in the United States, limiting its ability to pump and ship more oil. “Tight (shale) oil’s been eating OPEC’s lunch for the last few years. The lack of infrastructure will temporarily cede market share back to OPEC,” R.T. Dukes, head of U.S. Lower 48 oil supply at Wood Mackenzie said in a note last week. Curtis Martin Womens Jersey
Shell, Chevron returning to eastern Gulf of Mexico after storm
Royal Dutch Shell Plc was returning workers to the eastern Gulf of Mexico and Chevron Corp restored some production on Monday after the passage of Subtropical Storm Alberto, the companies said. Shell plans to restore production at its Ram Powell Hub in the Viosca Knoll area of the Gulf as it soon as it confirms the platform can be operated safely, the company said in a statement. On Friday, Shell shut in production at its offshore Ram Powell hub ahead of the storm’s move into the U.S. Gulf of Mexico. The facility is capable of processing about 60,000 barrels of oil and 200 million cubic feet of gas per day. Separately, Chevron restored production on the Blind Faith and Petronius production platforms in the Gulf after the passage of Storm Alberto, a company spokeswoman said on Monday. The two platforms were shut in as Alberto, the first named Atlantic storm of 2018, was charging across the eastern Gulf. The Atlantic hurricane season officially begins on June 1. The Gulf of Mexico is home to 17 percent of daily U.S. crude output and 5 percent of natural gas output, according to the U.S. Energy Information Administration. More than 45 percent of U.S. refining capacity and 51 percent of natural gas processing capacity are located along the Gulf. Devon Kennard Authentic Jersey
States can lower petrol prices by Rs 2.65, diesel by Rs 2: SBI research report
States can cut petrol prices by Rs 2.65 a litre and diesel prices by Rs 2 litre, a SBI research report has said. This suggestion has come at a time when government-owned oil marketing companies have hiked fuel prices for 15th successive day. Retail price of petrol on Monday were at Rs 78.27 a litre in Delhi, Rs 86.08 a litre in Mumbai, Rs 80.91 a litre in Kolkata and Rs 81.26 a litre in Chennai. All these prices are the highest so far. Similarly, diesel was being sold at Rs 69.17 a litre in Delhi, Rs 71.72 a litre in Kolkata, Rs 73.64 a litre in Mumbai and Rs 73.03 a litre in Chennai. Now the good news is that Brent crude prices have slipped from a record high of $80 a barrel (one barrel = 159 litres) and is now hovering in the range of $75-76 a barrel. The Government has maintained that it is trying to find out a solution for rising fuel prices. A report authored by Dr. Soumya Kanti Ghosh Group, Chief Economic Adviser, SBI, believed that finding a lasting solution to the current increase in oil prices is a delicate balancing act. “Our analysis shows that at the current crude prices, and extending our analysis to 19 States (overall consumption share is 93 per cent both in petrol and diesel), the States could have gained at least an additional Rs 187.28 billion of revenue/Rs 26.75 billion additional revenue over and above the budget estimates of States revenue for every $1/barrel increase in oil prices,’’ it said. It further added that given that these revenue if foregone will not impact the States fiscal position. “We estimate that on an average, States can cut petrol prices by Rs 2.65 /litre and diesel by Rs 2/ litre, if the entire revenue gain was to be neutralised. This is the most plausible scenario under the current circumstances,” it said. It has one more suggestion to lower the prices but it could raise fiscal deficit for the States. “One suggestion to further rationalise the petrol and diesel prices is to consider a pricing mechanism where VAT is imposed on base price only by States and not on prices inclusive of Centre’s tax. If this was the case, diesel prices could further reduce by Rs 3.75 /litre and petrol prices by Rs 5.75/ litre,” it said, while adding that such an exercise would cost Rs 346.27 billion of tax revenues and translate into 0.2 per cent of consolidated fiscal deficit of states. Supporting Centre’s reluctance on reducing the excise duty, the report said that if the Centre cuts the excise by Re 1, the loss of revenue will be to the tune of Rs 107.25 billion for every Re 1 cut in central excise. This will push up the deficit of Centre, unlike states. “We strongly believe that the revenue collected by the Centre on oil through excise duty has helped it to significantly step up capex expenditure from the levels of FY14. Road building has jumped by 2.3 times over 4,260 km in FY14 and railways capex by 2 times from Rs 674.32 billion in FY14 and provision of financing social sector programmes and MSP support programme in FY19 budget,” it said. Tyreek Hill Womens Jersey
The fall in crude oil prices is just what Modi needed
The sharp fall in global crude oil rates over the last couple of days may come as a breather for India’s Narendra Modi government which had run into tricky political waters over rocketing fuel prices. The world’s three largest oil producers—Saudi Arabia, Russia, and the US—have increased supply, leading to a near 5% crash in the global benchmark Brent crude since Friday (May 25). Earlier, the world’s major oil-exporting nations had cut back production, leading to the surge in oil prices since the start of the year. That, in turn, led to surging domestic prices, putting the government at odds with voters a year before the next general election. India’s fuel retailers have hiked petrol and diesel prices now for 15 days in a row to pass on the rise in global prices. This had led to a demand for a cut in duties that make up for over half the retail price in India. Even Rajiv Kumar, the vice-chairman of the government’s leading think tank, the Niti Aayog, had advised a cut in duties at both the central and the state level to ease consumers’ load. However, the government did not budge as the proposed cut in duties would have eaten into its revenue, further stretching its delicate financials. Now, bringing some respite to Modi, the tide has halted, at least temporarily. The Oil and Petroleum Exporting Countries (OPEC), the lobby of the world’s largest oil producers, along with Russia, is looking to pump more oil as the global inventory has depleted. OPEC had cut back production at the start of 2018 to ensure a reduction in global inventories. On the other hand, the latest data show that US oil producers have hired more rigs than in any one week since 2015. Drillers in the US have stepped up production now that global crude oil prices are back to a level that is well above their cost of production. International crude prices may have come off the spiral for now, but it may be too soon to predict that the slide will continue unabated. Chicago Bears Womens Jersey
Oil Ministry gives in-principle nod to launch petrol, diesel futures: ICEX
The oil ministry has given its in-principle approval for futures trading in petrol as well as diesel and the final clearance from regulator SEBI should come soon, a top official of commodity derivatives exchange ICEX said today amid rising fuel prices. The development also comes at a time when state-run oil marketers have hiked petrol and diesel prices continuously for the past two weeks. “The Petroleum and Natural Gas Ministry has given an in-principle nod to launch petrol and diesel futures contracts and we are hoping that SEBI will give final approval in this regard soon,” ICEX Managing Director and Chief Executive Officer Sanjit Prasad told PTI. He said the decision was taken by the ministry after consultations with oil marketing companies and other experts. The contracts are expected to help hedge against volatility in oil prices. The Indian Commodity Exchange (ICEX) had approached SEBI seeking its nod to launch petrol and diesel futures contracts. Following this, the capital markets watchdog had sought views from the ministry in this regard. ICEX was asked by the ministry to give a detailed presentation on petrol and diesel futures contracts to oil minister Dharmendra Pradhan, senior bureaucrats and oil marketing companies, Prasad noted. “After getting approval from the regulator, we will soon launch the product as we have all the infrastructure in place for this,” he added. Petrol price has been hiked by Rs 3.64 a litre and diesel by Rs 3.24 in Delhi since state-owned oil firms ended a 19-day pre-Karnataka poll hiatus to resume daily price revision on May 14. Diamond futures Last month, the commodity exchange launched 30-cents diamond futures contracts in addition to its product basket of 1-carat and 50-cents contracts. The bourse had launched the world’s first diamond derivatives contracts in August 2017 with 1-carat futures contracts, and had subsequently added the 50-cents contracts. Keke Coutee Authentic Jersey
PM Modi: 100 million LPG connections given in 4 years against 130 million in 6 decades
Prime Minister Narendra Modi on Monday said 100 million LPG connections including 40 million free to poor women, were given in last four years, compared to 130 million in six decades since independence, as his government stepped up efforts to shield women and children from kitchen smoke. Interacting through video-conference with some of the women beneficiaries who received free cooking gas connection under the Pradhan Mantri Ujjwala Yojana, Modi recounted his own childhood when his mother struggled with smoke emitting from cooking on firewood or cow dung, to say his government will increase coverage of clean fuel to 100 per cent households in the near future. “Till 2014, only 130 million LPG connections were given. These were mostly to rich and affluent class. In the past four years, we have given 100 million new LPG connections, mostly to poor,” he said. “Ujjwala Yojana has strengthened the lives of the poor, marginalised, dalits, tribal communities. This initiative is playing a central role in social empowerment.” Launched in May 2016, the scheme aims to provide in next three years as many as 50 million free cooking gas connections to women from extremely poor households, aimed at reducing the use of polluting fuels such as wood and dried cow dung that, according to the World Health Organization, cause 1.3 million premature deaths in India every year. The target was raised to 80 million this year by adding two additional years. India aims to increase liquefied petroleum gas (LPG) usage to cover 80 per cent of its households by March 2019, against 72.8 percent in 2017. The Prime Minister did not give a date for achieving 100 per cent coverage. Modi said LPG is the cleanest and easily available source of energy that is giving women a healthier lifestyle, saving them time, helping them financially and saving the environment. As many as 45 per cent of the 40 million free LPG connections given under Ujwalla are to dalits, he said. Stating that his government stood for empowerment of the dalits, the Prime Minister said more than 1,200 petrol pumps have been given to dalit families since 2014 as compared to 445 retail outlets given to such families during 2010-2014 period of the previous UPA regime. Similarly, 1,300 families got LPG distributorship as compared to 900 in the previous years. The government, he said, is very serious in eliminating middlemen and so the beneficiary list has been made transparent. Apart from those included under socio-economic caste census (SECC) to avail the scheme, the extended Pradhan Mantri Ujjwala Yojana would now cover all SC/ST households, most backward classes, beneficiaries of Pradhan Mantri Awas Yojana (Gramin), Antyoday Anna Yojana, forest dwellers, people residing in river and river islands. Modi said the government is targeting 0.1 million LPG Panchayats (peer learning platforms to support behaviour change in Ujjwala beneficiaries) this year to boost the LPG refill consumption and provide a window for the benefits of cleaner fuel to become visible. Under the Pradhan Mantri Ujjwala Yojana, the government provides a subsidy of Rs 1,600 to state-owned fuel retailers for every free LPG gas connection that they install in poor rural households without one. This subsidy is intended to cover the security fee for the cylinder and the fitting charges. The beneficiary has to buy her own cooking stove and refills. To reduce the burden, the scheme allows beneficiaries to pay for the stove and the first refill in monthly installments. However, the cost of all subsequent refills has to be borne by the beneficiary household. He said 70 per cent of the villages are 100 per cent covered by LPG and 81 per cent village are covered up to 75 per cent. In his interaction with women beneficiaries from different states, he asked them if they were getting LPG refills on time and if any middlemen were asking for money. He asked them about their experience of using LPG and how it saved them time, which they can utilise for supporting the family financially by starting schemes like tiffin service. Modi said he will never forget one of Premchand’s stories, Idgah. “The story is about young Hamid, who does not buy sweets or gifts during Id but buys a ‘Chimta’ so that his grandmother does not burn her hands while cooking. This story is extremely emotional.” “Ujjwala Yojana is leading to better health for India’s Nari Shakti,” he said. Louis Lipps Authentic Jersey
Fuel price hike: Chidambaram slams government for ‘celebrating’ 4 years in office
Congress leader P Chidambaram has slammed the NDA government for “celebrating” the completion of its four years in office saying petrol prices is rising and job creation is dismal during the period. In a series of tweets, Chidambaram said the agricultural growth anaemic and farm wages stagnant during the NDA government rule. “Read the graphs in newspapers ‘celebrating’ 4 years of Modi government: growth rate declining, rupee depreciating. “And petrol prices and inflation rising, IIP stagnant, exports struggling to cross USD 300 billion. And job creation dismal,” he said. The Modi government has completed its four years in office yesterday. Vernon Davis Womens Jersey
Oil Roil: How About Some Self-reliance?
Every economic crisis in India has been triggered by excess of dollar spending over dollar earnings leading to a foreign exchange crisis. The first two, in 1957 and 1965, were caused by dystopian policy on capital goods and drought-driven food imports. Since then, almost in every decade, in 1974, 1979, 1982, 1991, and more recently in 2013, the economy has mostly slipped on the oil slick. The baritone of rising crude prices and the shrieking falsetto of the falling rupee have announced crises amidst operatic politics. The spectre is back to haunt the economy in 2018. The dollar is over Rs.68 and Brent crude prices are hovering between $75 and $80 per barrel, which is $10 per barrel higher than estimated in the budget—a rise by one dollar adds around Rs.8 billion or about $120 million to the import cost, and more if the rupee slips further. The gap between exports and imports, dollar earnings and expenditure in 2017-18 was around $157 billion. Crude oil accounts for roughly a fourth of the imports. The headline attention is on the cost consumers must now pay following 12 hikes—prices have touched the highest yet, and the per-litre price of petrol is `85.78 and diesel is `73.36 in Mumbai. The government, following public outrage, has promised a long-term plan to ease the price pain. There is talk about shifting petro goods on to GST to curb the current structure of ad valorem tax on tax. The state governments have been urged to cut VAT and there is some buzz about structuring subsidies. All this is par for the course. There is no doubt the angst and anger is real. The issue is the grief of rising costs on the ground, but the bigger issue is the cost of vulnerability to the economy. Amidst the oil roil it would be pertinent to look at domestic output. India’s output of oil in 2017-18 dipped to 35.68 million tons—the lowest in six years. Can a $2.5 trillion economy with rising consumption and GDP afford to be dependent for 82 per cent of its needs on imports? India’s tryst with oil exploration dates back to the 1800s. The global oil industry was born in August 1859, in a creek in Pennsylvania in the US. Eight years later, in 1867, oil was discovered in Digboi in Assam, digging started around 1889, and the first refinery was set up in 1901. After Independence, PSUs were set up to explore and produce to fuel the new republic. The big boost came with Bombay High and other discoveries followed when the sector was opened up post-liberalisation. The subsidy regime, through the years, thwarted expansion, investment and pricing of risk and reward. Every five-year plan repeated the mantra of self-reliance, urging encouragement to national and international oil companies to explore oil and gas, suggested induction of new technology and set targets for higher domestic production. However, ambition has not translated into outcomes. The 12th Plan, for instance, had set a target of 216 MMT for crude oil production between 2012 and 2017. Actual production was 186.06 MMT. It is not just crude oil; the target for gas was 341 MMSCMD and the actual output was 173.88 MMSCMD—lower than the previous plan period. The reasons, the ministry told the Parliamentary Standing Committee, ranged from ageing fields to clearances to delays. For sure there are many programmes for the sector and a plethora of acronyms—NELP, HELP, NSP, OALP, DSF et al. There is also the aspiration of bringing down import dependence by 10 per cent by 2022. The road map includes promoting energy efficiency, demand substitution, tapping biofuels and refinery process improvement. What about new discoveries? India has 26 sedimentary basins across 3.14 million sq km. Of this the government does not have geo data on nearly half or 1.5 million sq km. A National Seismic Programme is under way to map these areas. At the current pace, investment interest and output levels, the 2022 deadline seems unlikely to be met. Could India learn some lessons from the United States on leveraging natural resources? Since 2001, the US government brought geopolitics into play in economic policy. It has promoted development and induction of technology to enable multiple methods of extraction, including fracking, and eased regulatory hurdles. Policy and market incentives combined to boost production and create thousands of jobs. At a fundamental geopolitical and market level the domination of Opec is challenged by the ability of shale producers to bring wells in and out of production as per pricing changes. In less than ten years, the United States ramped up its oil output from 4.8 million barrels per day in 2008 to over 9.3 million barrels per day in 2017. Unsurprisingly, net crude imports to US slid from nearly 13 million barrels per day in 2006 to around 3 million barrels per day, the lowest since 1982. In March 2018, for the first time since November 1970, US output crossed 10 million barrels per day. The International Energy Agency estimates that the US could be the world’s largest oil producer in five years at 12.1 million barrels per day. For sure the scale, geography and the geology are different. However, geopolitics and the consequences of dependence are not dissimilar for any economy. The way out of dependence is self-reliance. And India has substantial potential. In fact, the March 2018 report of the Parliamentary Standing Committee reveals that the estimate of “prognosticated conventional hydrocarbon resources” has gone up from 28.1 billion tons (oil and oil equivalent of gas) to 41.87 billion tons. The potential to reduce dependence on imports is there. This potential, though, has to be leveraged. This requires a champion, a C Subramaniam, and a fast-track policy. Patrick Chung Jersey