A. Harikumar
Rising crude oil prices which broke the barrier of $ 110 a barrel on Wednesday continued to rally on today (March 3) also. The benchmark crude oil type Brent was traded over $ 117 a barrel early on the day and the US benchmark oil WTI touched $ 116. Later on the day, the prices cooled off with Brent trading at $ 115 a barrel and WTI settling at $ 113, a barrel. The sudden surge in prices is the result of the worsening Russia-Ukraine war.
While the WTI rose to its highest level since 2008, Brent recorded its highest price since since 2012. Sky-rocketing oil prices are expected to impact fuel prices in India also with Indian media expecting oil companies in the country to hike prices of petrol and diesel by ten percent next week. This could mean a rise of around Rs nine in retail prices of petrol and diesel.
Oil prices have been on an upswing during the last couple of months, as the global economic activity was returning to pre Covid pandemic levels. Almost all countries have lifted the lockdowns imposed during the peak of the pandemic. Crude oil prices had risen to $ 86.4 per barrel on October 26, 2021, but it came down to $ 68.87 per barrel in December 2021. However, the present sharp spike in oil prices is the result of the Russia-Ukraine war. Russia is one of the major producers of crude oil in the world along with Saudi Arabia and USA with an out put of around 11 million barrels a day.
Though the US and its western allies have not imposed an embargo on Russian oil considering their own interests and its fallout on the global oil market, the restrictions imposed on Russian banking system is causing the present crisis. It is pointed out that major refiners like Shell are still sourcing oil from Russia, and in case of direct oil embargo they will stop purchase and oil prices will move up further.
While Russia supplies almost 1/3rd of the gas needed for Europe and almost the same amount of oil needed for Europe, India sources less than two percent of its oil and gas imports from Russia. Thus though a shortage in Russian oil supply may not hit supplies in India, the price rise in the global market could cause ramifications in the fuel prices in India too. Since India’s budget 2022-23 had estimated oil prices to be $ 70-75, the current prices will exacerbate the fiscal deficit of the country. It could also result in inflation.
Meanwhile, global media quoting oil industry experts forecast oil prices to cross $ 120, a barrel in the coming days.
