Crude Oil: Amidst the backdrop of a global struggle with increasing inflation, a fresh economic hurdle is emerging in the form of soaring global crude oil prices. In the year 2023, there has been a swift escalation in crude oil prices, exemplified by Brent Crude’s remarkable increase of nearly 19 percent.
Oil prices continue to rise
Oil prices have climbed steadily for the fourth consecutive session on Tuesday, with concerns arising about a potential supply deficit due to weakened shale output in the United States. This situation is unfolding as major oil-producing nations have committed to extended production cuts. The repercussions of this surge in global crude oil prices are expected to have significant ramifications worldwide, particularly for India, which ranks as the third-largest oil consumer and importer.
India’s vulnerability is compounded by its heavy dependence on imports, which account for around 85 percent of its crude oil requirements. Experts anticipate that crude oil prices could surge to $105 per barrel this year, representing a substantial increase from the current level of approximately $93.
Crude Oil Prices’ rise will increase Petrol-Diesel price domestically
The spike in worldwide crude oil prices has the potential to result in a rise in domestic petrol and diesel prices, which could have a substantial impact on a significant portion of the population, particularly those in lower-income groups. A parallel situation was witnessed a few years ago when India experienced record-breaking petrol and diesel prices, exceeding Rs 100 per litre. In the event of a surge in global crude oil prices, unless the government implements measures like reducing fuel taxes, domestic fuel prices are expected to increase.
Effects of risings prices
The repercussions of fuel prices have the potential to create a ripple effect throughout the Indian economy, with the initial impact being felt by individual vehicle owners who may need to adjust their monthly budgets to accommodate rising fuel expenses, potentially leading to reduced fuel consumption.
Furthermore, India’s automotive sector, a significant source of employment in the nation, is at risk of witnessing a decline in vehicle sales as fuel prices continue to climb. Such a drop in demand could send shockwaves throughout the industry, affecting the extensive network of micro, small, and medium-sized enterprises (MSMEs) associated with it.