Context: In the biggest slump since the 1991 Gulf War, crude oil prices fell as much as 33 per cent between Friday and Monday and hit a level of $33 per barrel — as Saudi Arabia and Russia signalled they would hike output despite sliding demand globally.
Current Scenario

• Major oil buyers such as India are set to gain following Russia’s refusal to back broader cuts in crude oil production by the Organization of the Petroleum Exporting Countries (Opec).
• Crude prices are on a tailspin after Russia did not agree to Opec’s proposal for an additional production cut of 1.5 million barrels per day (mbpd), amid a slump in demand following the Covid-19 outbreak.
• Prices are expected to witness more volatility, given Russia’s geo-strategic play in denying the production cut benefits to US shale oil producers and Saudi Arabia increasing production.
• The supply glut will have a wide-ranging impact on energy markets.

About OPEC

• The Organization of the Petroleum Exporting Countries (OPEC) was founded in Baghdad, Iraq, with the signing of an agreement in September 1960 by five countries namely Islamic Republic of Iran, Iraq, Kuwait, Saudi Arabia and Venezuela. They were to become the Founder Members of the Organization.Its headquarter in Vienna,Austria.
• These countries were later joined by Qatar (1961), Indonesia (1962), Libya (1962), the United Arab Emirates (1967), Algeria (1969), Nigeria (1971), Ecuador (1973), Gabon (1975), Angola (2007), Equatorial Guinea (2017) and Congo (2018).
• Ecuador suspended its membership in December 1992, but rejoined OPEC in October 2007. Indonesia suspended its membership in January 2009, reactivated it again in January 2016, but decided to suspend its membership once more at the 171st Meeting of the OPEC Conference on 30 November 2016 and Ecuador on Jan 2020.Gabon terminated its membership in January 1995. However, it rejoined the Organization in July 2016.Indonesiais a former member,Ecuador, and Qatar will no longer be the member of OPEC starting on 1 January 2019.
• This means that, currently, the Organization has a total of 14 Member Countries which produce about 44% of the world's oil and own over 73% of the world's oil reserves.
• The OPEC Statute distinguishes between the Founder Members and Full Members - those countries whose applications for membership have been accepted by the Conference.
• The Statute stipulates that “any country with a substantial net export of crude petroleum, which has fundamentally similar interests to those of Member Countries, may become a Full Member of the Organization, if accepted by a majority of three-fourths of Full Members, including the concurring votes of all Founder Members.”
• The Statute further provides for Associate Members which are those countries that do not qualify for full membership, but are nevertheless admitted under such special conditions as may be prescribed by the Conference.

How does it impact India?

• With India spending $111.9 billion on oil imports in FY19, analysts are expecting a perfect storm in the energy markets that will help major consumers such as India manage inflationary and fiscal pressures.
• India is the world’s third-largest oil buyer, and the fourth-largest liquefied natural gas (LNG) importer.
• The Indian basket represents the average of Oman, Dubai and Brent crude.
• India has already begun to reap the gains with the three state-run oil marketing firms, Indian Oil Corp. Ltd, Bharat Petroleum Corp. Ltd and Hindustan Petroleum Corp. Ltd reducing the price of non-subsidized domestic cooking gas.

For India, its a crisis we must not waste. Three opportunities we need to leverage:

• The government can use low oil prices to spur consumption but also retain some of the windfall gains to tackle the deficit. 
• Step up sanitisation and the swachh movement which will make India appealing to tourists looking for alternatives to China.
• Step up our incentives and step down regulations for global investors who will now look for alternative manufacturing sites to China.