The ongoing Russia and Ukraine conflict is likely effect economy and prices in many nations and one of the major consequences of this war, is that global crude oil prices will be kept in the range of $95-to-$125 per barrel in the short term.
Consequently, the geo-political crisis-led global hike in crude oil prices is expected to push India’s domestic prices of petrol and diesel by Rs 15-22 per litre.
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It is widely expected that the OMCs will revise the current prices on or after March 7, which is the last day of voting in the ongoing state assembly elections.
However, an excise duty cut may dampen the impact on petrol and diesel prices to an extent, but not entirely.
At present, India imports 85 per cent of its crude oil needs.
Besides, the cascading effect of higher fuel cost will trigger a general inflationary trend.
Already, India’s main inflation gauge — Consumer Price Index (CPI) — which denotes retail inflation, has crossed the target range of the Reserve Bank of India in January.
Russia is the third largest producer of crude oil in the world and it is feared that sanctions against the nation will curtail global supplies and stifle growth.
“The fear of lower supplies with sanctions on Russia has weighed on upcoming supply from Iran. Crude oil prices may keep form trading range next week capping upside at $130 and support at $95 per barrel,” said Tapan Patel, Senior Analyst (Commodities), HDFC Securities.
“The higher oil prices has raised market expectations that govt of India may hike fuel prices post UP elections, expecting rise by Rs 10-15 per litre.”
