Recently a report came from Iqra. In which it was said that in view of the upcoming assembly elections, the Government of India may reduce the prices of petrol and diesel by Rs 2-3 per litre. But the war between Israel and Iran may hinder this cut. Yes, Israel’s tension with Iran may stop the supply of crude oil in the Middle East. The effect of which can be seen in prices. When Iran attacked Israel, crude oil prices rose more than 4 percent. Due to which crude oil prices had surpassed $74 per barrel. Experts believe that in the coming days the supply of crude oil could be disrupted by one million per barrel. If this happens, the price of Brent crude oil could exceed $80 per barrel. Let us also tell you how tension in the Middle East can create problems for India.
Crude oil prices soared
If we look at the international market data, the price of crude oil is increasing. After Iran’s attack on Israel, crude oil prices have skyrocketed. If we look at the current data, the price of Brent crude oil from the Gulf countries is trading at $74.64 per barrel, up one and a half percent. However, a day ago the price of Brent crude oil had reached $75.45 per barrel. Since Iran’s missile launch, the price of crude oil has seen an increase of more than 5 percent.
On the other hand, a good increase in US crude oil prices is observed. On Wednesday, the price of WTI is trading at $70.97 per barrel with an increase of 1.63 percent. However, a day ago prices had exceeded $71 per barrel. By the way, US crude oil prices have seen an increase of more than 5.53 percent in 24 hours.
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The price can reach up to $80
Geopolitical tension has increased greatly. Where the United States came and supported Israel. On the other hand, other Gulf countries are also joining Iran. In such a situation, there may be an even further rise in crude oil prices in the coming days. According to experts, if tension in the Middle East does not decrease, the price of crude oil on the international market may exceed $80 per barrel. According to Reuters, if tensions in the Middle East do not ease, the supply of 1 million barrels of crude oil could be disrupted in the coming days. Therefore, an increase in the price of crude oil can be observed. On the other hand, the OPEC Plus meeting will also be held on Wednesday. In which it will be considered increasing the offer or maintaining the status quo. Russia will also participate in this meeting. The situation in Iran can also be discussed.
What will be the impact on India?
If the price of crude oil in the international market reaches or exceeds $80, then planning to reduce gasoline and diesel prices in the coming days may be postponed. As stated in the recent ICRA report, fuel prices may reduce by Rs 2-3 in the coming days. Currently, India imports 85 per cent of its crude oil demand. A major part of India’s import bill is for crude oil. If crude oil prices fall, then India’s import bill reduces and this helps reduce petrol and diesel prices in India. So inflation remains under control in the country. But when crude oil prices increase, the outflow of foreign exchange from the country increases and inflation increases. Which has an adverse effect on the country’s economy.
How is the economy affected?
According to the RBI report, crude oil accounts for around 25 per cent of India’s total imports, which is imported from the Middle East and Russia. According to the report, fluctuations in crude oil prices have a direct impact on inflation in India. If the price of crude oil increases by $10 per barrel, inflation will increase by approximately 0.49 percent. This means that with this increase, India’s fiscal deficit will increase by 0.43 percent. The report believes that the same impact will be seen on the country’s GDP, i.e. a drop of 0.43 percent. Since the Iran attack, the price of Brent crude oil has seen an increase of more than $4 per barrel. If prices exceed $80 per barrel, the country’s economy will be negatively affected in the coming days.
Situation before the Iran attack
Talking about the situation before the Iran attack, the first half of the current financial year saw a drop of more than 17 percent in crude oil prices on MCX. While in Brent crude oil prices there has been a drop of more than 17 percent. On March 28, the last trading day of the last financial year, the price of Brent crude oil was $87.48 per barrel. By September 30, the price of Brent crude oil had fallen more than $16 per barrel. Thanks to this, the country’s oil companies made enormous profits. According to an ICRA report, OMCs in India were making profits of Rs 15 per liter for petrol and Rs 12 per liter for diesel.
what the experts say
Political tension is at its peak with the arrival of Anuj Gupta, head of commodity currencies at HDFC Securities. There is no chance of it slowing down anytime soon. The effect of this can be seen in the supply of crude oil. After which a further rise in crude oil price will be seen. He also said that in the coming days crude oil prices could exceed $80 per barrel. So reducing petrol and diesel prices can be a difficult task.
