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Crude Surge Threatens India’s Import Bill and Inflation
Oil prices have risen because of growing tensions in West Asia.
This matters to India because the country imports more than 88% of the crude oil it uses.
When oil becomes more expensive, India has to spend more money buying it from other countries.
India’s oil import bill rose to $63.4 billion during April-July.
More expensive oil can also make transport and energy costlier.
Petrol and diesel prices have not changed for more than three months, which may reduce the profits of fuel sellers.
The Strait of Hormuz is carrying less oil than usual, creating additional supply concerns.
If prices stay high, India could face more inflation and pressure on its currency.
Brent crude rose above $99 a barrel, while WTI reached about $94 amid West Asia tensions.
India’s crude import bill increased 56% to $63.4 billion during April-July despite broadly unchanged volumes.
India imports more than 88% of its crude requirements, leaving it exposed to global price increases.
The Indian crude basket averaged $100.75 a barrel in September, up from $90.19 in August.
Higher crude prices could pressure fuel companies, the rupee, inflation, the current account and energy-intensive industries.
- Who
- India, Indian fuel companies, refiners and other energy-intensive industries are affected.
- What
- International crude prices have risen, increasing concerns about India’s import bill, inflation and energy supplies.
- Where
- The risks are linked to West Asia and the Strait of Hormuz, with effects expected in India.
- When
- The price increase was reported on Tuesday; import-bill data covers April-July, while crude-basket comparisons cover July through September.
- Why
- Escalating regional tensions and slower traffic through the Strait of Hormuz have raised concerns about global oil supplies.
Key facts
- Brent crude
- Around $99 a barrel after rising more than 2% on Tuesday.
- WTI crude
- About $94 a barrel after gaining nearly 3%.
- India’s crude import dependence
- More than 88% of requirements are imported.
- Import bill
- $63.4 billion during April-July, up from $40.5 billion a year earlier.
- Indian crude basket
- Averaged $100.75 a barrel in September, compared with $90.19 in August and $82.04 in July.
- Strait of Hormuz
- Normally carries about one-fifth of global oil and LNG supplies.
- West Asian shipments
- Reportedly declined to around 11 million barrels per day from roughly 18 million.
Sources
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