‘Crude oil price discovery cannot be left unregulated'

Price discovery of crude oil cannot be left entirely unregulated, the Petroleum Minister, Mr S. Jaipal Reddy, said. The Minister was speaking at the International Energy Forum (IEF), Extraordinary Ministerial Meeting at Riyadh, Saudi Arabia, on Tuesday.

The Minister extended India's support for further initiatives by IEF and other international organisations, for putting in place suitable regulatory mechanisms, to prevent a recurrence of 2008 situation.

Continued political unrest in OPEC member country Libya is leading to the current volatility in crude oil price. The price at which Indian refiners buy their crude oil rose sharply on Tuesday at $105.05 a barrel. In 2008, the Indian crude oil basket had breached the $ 110 a barrel mark.

He emphasised the need for improving understanding of inter-linkages between the physical and financial markets to address the issues of price volatility and price discovery.

Mr Reddy underlined that unregulated over-the-counter (OTC) transactions and trading in ‘paper barrels' along with unbridled speculation activity were to blame for unprecedented oil price rise in 2008. He said, “We need to consider establishing position limits and moving OTC activity on to regulated exchanges.”