NEW DELHI, Sep 9: Rising tensions in West Asia have pushed international crude oil prices above the $100-per-barrel mark, increasing pressure on India’s state-owned fuel retailers and raising concerns over the wider impact on the economy.
State-owned oil marketing companies are currently estimated to be losing around Rs 5 per litre on petrol and Rs 23 per litre on diesel, as domestic fuel prices remain under pressure from the sharp rise in international crude prices.
Brent crude, the global benchmark, climbed around 2.5 per cent to above $100 a barrel, while US West Texas Intermediate (WTI) rose nearly 2 per cent to around $95 a barrel. Brent had last crossed the $100 level on July 23.
The latest increase follows heightened tensions in West Asia, with renewed exchanges of fire between the United States and Iran adding to concerns about disruptions to oil supplies and shipping routes in the region.
For India, which depends heavily on imported crude oil to meet its energy requirements, a sustained rise in global oil prices can have a direct impact on the economy. Higher crude prices increase the country's import bill and can put pressure on the trade deficit and current account balance, while also increasing demand for dollars and putting pressure on the rupee.
Expensive crude can also raise transportation and logistics costs because diesel is widely used by trucks, buses, construction equipment and other commercial vehicles. Higher fuel and freight costs can eventually increase the cost of transporting food, consumer goods and industrial products.
The impact can extend to sectors such as aviation, manufacturing, chemicals, logistics, automobiles, agriculture and consumer goods, where fuel and energy are important components of operating costs. Businesses facing higher input expenses may have to absorb the additional costs or pass part of them on to consumers.
A prolonged increase in crude prices could also create additional inflationary pressure, particularly if higher fuel, transportation and production costs begin to feed into prices across the economy.
At the same time, lower crude prices would provide relief to India's import bill, government finances and businesses. The direction of global oil prices will therefore remain important for India's inflation outlook, currency stability, corporate costs and overall economic growth in the coming months.
The immediate concern for fuel retailers is the widening gap between international oil costs and domestic pump prices. If crude remains elevated for an extended period, the pressure on oil marketing companies could increase further, making global energy prices an important factor for India's economy and financial markets.
