This article covers “Daily Current Affairs” and the topic details “ OPEC+”. The topic “OPEC+” has relevance in the International Relations and Energy Security section for the UPSC CSE exam

Relevance of OPEC+

For prelims:

What is OPEC+?

For Mains:

GS 2 and 3: International relations , Energy Security

Positive Impact of OPEC+?

Negative impact of OPEC+?

Impact on India?

Why in the news?

OPEC+ producers announce voluntary oil output cuts from May to end of 2023.

What is OPEC+

OPEC+ is an alliance between the Organization of the Petroleum Exporting Countries (OPEC) and a group of non-OPEC oil-producing nations.The formation of OPEC+ took place in 2016 as a response to the global oil market downturn and the need for coordinated production cuts to stabilize prices.

The current members of OPEC+ include 13 OPEC members (Algeria, Angola, Congo, Equatorial Guinea, Gabon, Iran, Iraq, Kuwait, Libya, Nigeria, Saudi Arabia, United Arab Emirates, and Venezuela) and 10 non-OPEC countries (Azerbaijan, Bahrain, Brunei, Kazakhstan, Malaysia, Mexico, Oman, Russia, South Sudan, and Sudan).

Positive Impact of OPEC+?

  • Price stability: One of the primary objectives of OPEC+ is to stabilize oil prices. By coordinating production levels and adjusting supply in response to market conditions, OPEC+ aims to prevent extreme price fluctuations and create a more stable pricing environment. 
  • Market equilibrium: OPEC+ plays a crucial role in maintaining a balance between global oil supply and demand. By monitoring market conditions and adjusting production levels, the alliance seeks to avoid oversupply or undersupply situations. 
  • Investment confidence: Stable oil prices resulting from OPEC+ decisions can provide a conducive environment for investment in the oil and gas industry. When prices are relatively stable, companies can make informed investment decisions and plan for long-term projects with greater certainty.
  • Revenue stability for producers: OPEC+ decisions can help stabilize revenue streams for oil-producing countries. By managing production levels, the alliance aims to prevent drastic price drops that could significantly impact the income of member countries heavily reliant on oil revenues. 
  • Collaboration and dialogue: OPEC+ serves as a platform for collaboration and dialogue between OPEC and non-OPEC oil-producing nations. This alliance fosters a cooperative approach to addressing challenges in the global oil market, promoting mutual understanding and shared goals. 
  • Long-term sustainability: OPEC+ decisions can contribute to the long-term sustainability of the global oil industry. By aiming to maintain price stability and prevent extreme volatility, the alliance helps create an environment where producers can invest in sustainable practices, research, and development. 
  • Geopolitical stability: Stable oil prices resulting from OPEC+ decisions can contribute to geopolitical stability by reducing the potential for energy-related conflicts. When prices are relatively steady, countries have less incentive to engage in aggressive competition or resource-driven conflicts. 


Negative impact of OPEC+?

  • Higher energy costs: OPEC+ decisions to reduce oil production or withhold supply can lead to higher oil prices. This, in turn, can increase energy costs for consumers, including individuals, businesses, and industries.
  • Inflationary pressures: When oil prices rise due to OPEC+ actions, it can have a ripple effect on the broader economy. Higher energy costs can drive up production and transportation expenses for goods and services, leading to inflationary pressures.
  • Economic slowdown: If OPEC+ decisions result in a sustained period of high oil prices, it can negatively impact economic growth. Increased energy costs can act as a drag on businesses, reducing profitability and investment. 
  • Disproportionate burden on oil-importing countries: Countries heavily dependent on oil imports, particularly developing nations, can bear a disproportionate burden from OPEC+ decisions. Higher oil prices can strain their balance of trade, current account, and foreign exchange reserves, impacting their overall economic stability. 
  • Uncertainty for oil-dependent industries: OPEC+ decisions and subsequent oil price volatility can create uncertainty for industries reliant on oil as a key input. Businesses in sectors like transportation, logistics, and petrochemicals may face challenges in planning and budgeting due to the unpredictable nature of oil markets. Uncertainty can hinder investment decisions and impede long-term growth prospects.
  • Geopolitical tensions: OPEC+ decisions can sometimes give rise to geopolitical tensions, particularly if they are perceived as favoring the interests of certain member countries over others. Disputes over production quotas or disagreements on market strategies can strain diplomatic relations and lead to regional rivalries, potentially impacting global energy security.


Impact on India?

  • Energy prices: OPEC+ decisions can directly affect global oil prices, and any significant increase in prices can lead to higher energy costs for India. This can impact various sectors of the economy, including transportation, manufacturing, and agriculture, as they heavily rely on oil and petroleum products. 
  • Current account and trade balance: India is a net importer of oil, which means it imports more oil than it exports. Therefore, higher oil prices resulting from OPEC+ production cuts or supply disruptions can widen India’s trade deficit and put pressure on the current account balance. This can have implications for the overall economic stability of the country.
  • Inflation: As mentioned earlier, higher energy costs due to OPEC+ decisions can contribute to inflationary pressures. Since oil and petroleum products are essential inputs for various sectors of the economy, increased prices can lead to higher production costs, which may be passed on to consumers through higher prices of goods and services.
  • Fiscal implications: Rising oil prices can impact India’s fiscal position. The government provides subsidies on certain petroleum products to mitigate the burden on consumers. If oil prices increase significantly, it can strain the government’s budget as it has to allocate more funds for subsidies, potentially affecting other development and welfare programs.
  • Policy responses: OPEC+ decisions and oil price fluctuations can prompt the Indian government to reassess its energy policies and strategies. Higher oil prices may incentivize efforts to diversify energy sources, promote renewable energy investments, and enhance energy efficiency measures to reduce dependence on imported oil.
  • Geostrategic considerations: India, as a major energy consumer, closely monitors developments in the global oil market and OPEC+ decisions. Fluctuations in oil prices and supply disruptions can have geopolitical implications and may necessitate diplomatic engagements or strategic partnerships to secure stable and affordable energy supplies.


Q.1 Which of the following statements is/are correct regarding OPEC+?

1.The formation of OPEC+ took place in 2016 in response to the global oil market downturn.

2.OPEC+ aims to stabilize oil prices through coordinated production cuts or increases.

3.India is a member of OPEC+

(a)1 only

(b)1 and 2 only

(c)2 and 3 only

(d)1,2 and 3 


Q.2  Which of the following statements is/are correct regarding OPEC+?

1.The formation of OPEC+ took place in 2016 to counter the growing influence of shale oil producers.

2.OPEC+ aims to stabilize oil prices through coordinated production cuts or increases.

3.The current members of OPEC+ include Saudi Arabia, Russia, and Nigeria.

(a) 1 only

(b) 2 and 3 only

(c) 1 and 3 only

(d) 1, 2, and 3


Q.3 “Discuss the impact of OPEC+ decisions on India’s energy security and economy. How do OPEC+ actions influence India’s oil import bill, current account balance, and fiscal position? Analyze the strategies adopted by India to mitigate the risks associated with OPEC+ decisions and ensure energy sustainability. Also, examine the geopolitical implications of OPEC+ decisions for India and suggest measures to enhance India’s energy resilience in the face of changing dynamics in the global oil market.”(15 marks)

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