Middle East Turmoil: Crude Oil prices hit 7 month high, India’s Oil bill to rise further

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T. Moharana

Biznextindia : While Iran is in a state of mourning in the aftermath of assassination of Major General Qasem Suleimani, the new commander of Iran’s Quds force Brigadier Ismail Ghaani has warned of ‘harsh consequences’.

“We tell everyone, be patient, and you will see the bodies of Americans all over the Middle East,” Ghaani was quoted by Al-Jazeera as saying on Saturday.

On the other hand, anticipating escalation from Iran, the US has decided to deploy additional 3000 troops in the Middle East. The troops are being sent from the 82nd Air borne division as a precaution to Iran’s threats.

Meanwhile, fresh unrest at the Middle East has impacted the international Oil price. The fear of a war, has pushed oil prices to seven month high. While the WTI crude has increased by 3% USD 63.05 and  Brent Crude has risen by 3.5% to USD 68.60 per barrel. The prices are likely to cross the USD 70 mark in the next few days as the escalation is rising.

The rise in Oil price is a fresh concern for India, as it imports almost 80% of its oil requirement. High oil price will increase the current account deficit of the government and would put pressure on the inflation front.

“Prices of petrol and diesel always react a little late to the rise in crude oil prices as State-run retailers fix fuel prices daily based on a complex algorithm of 15-day average international benchmark rates. Given the trend in oil prices, it is likely that fuel prices will increase in the next few days as well.  With the upcoming union budget which will be announced in a month’s time increase in oil price can also pose a challenge for the government on the fiscal side and the assumption made for the year. In the face of higher inflation, the options would be to either increase subsidy on the expenditure side or lower taxes (along with states) on revenue side.” said Care Ratings.

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