- Crude oil prices have gone up by more than US$20 a barrel since the beginning of 2022 due to escalating tensions between Russia and the US and its allies over the Ukraine issue
- The disruptions in supplies and rise in prices will have a huge negative impact on the Indian economy
New Delhi: Crude oil prices surged past the US$100/barrel-mark for the first time in seven years on Thursday after Russia’s President Vladimir Putin ordered a military operation in Ukraine. Brent crude rose above US$105 a barrel for the first time since 2014. The rise comes on the back of concerns regarding disruptions to global energy supply as Russia launched an all-out invasion on Ukraine by land, air and sea in the biggest attack by one state against the other in Europe since World War II.
Crude oil prices have gone up by US$20 per barrel in 2022 so far
Crude oil prices have gone up by more than US$20 a barrel since the beginning of 2022 due to escalating tensions between Russia and the United States and its allies over the Ukraine issue. Russia is a large exporter of oil and gas. The confrontation in the Russia-Ukraine region has fanned concerns over supplies of petroleum products and other commodities.
India is one of the biggest importers of oil and gas. The disruptions in supplies and rise in prices will have a huge negative impact on the Indian economy.
Impact of rise in crude oil prices on India
Shishu Ranjan, Vice President of Barclays, was quoted as saying that an increase in the Brent price is expected to put higher inflationary pressure on the Indian economy, which is already reeling under record high inflation in last five years. Higher brent prices will increase the input cost of industrial production and make Indian products uncompetitive. On the retail side, consumers’ disposable income will erode due to higher fuel prices and will curtail aggregate demand in economy.
Anish De, KPMG’s national head for energy, natural resources and chemicals, said that India has very large and growing energy requirements. “Especially in oil, given that we rely on imports for more than 85 percent of our needs the oil price increases that accompany conflicts among nations has an obvious negative effect. It can impact both economic growth and inflation levels.”
Economic expert Prakash Chawla said that India is hugely import-dependent on crude oil. “Over 85 percent of our crude oil requirements are met by imports. With the oil flaring up in the international market to over US$100 per barrel, the impact on Indian oil marketing companies and the users is going to be significant,” he said.
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