Crude oil prices rise by 19.5% to touch $ 71.95 per barrel.
Geopolitical tensions following the drone attacks on Saudi Arabia’s Aramco refineries are the primary reasons for this escalation.
This price rise could hit Indian motorists extremely hard.
The drone attacks on Saudi Arabia’s oil refineries contribute to the sharp escalation in crude oil prices by nearly 20%. As fuel prices in India are directly linked with the international crude oil market, Indian motorists could face a tough time in the next few days. The retail pricing is connected to the 14-day average crude oil price, but the effects of escalation will show up in the next couple of days. With some of the Indian states like Maharashtra gearing up for assembly elections, the Government could step in to absorb the price hike.
Petrol Price per litre
Diesel price per litre
K Ravichandran, Senior Vice-President of ICRA, comments that the fuel prices are sure to rise in the next few days. The Government has deregulated petrol and diesel prices with effect from 2010 and 2014 respectively. The retail fuel prices depend on two primary factors, the price of crude oil in the international market and the US Dollar exchange rate. Thus, if the price increases by $1 per barrel, our import bill will go up by Rs 3,029 crores. Similarly, if the price of US$ goes up by Rs 1, the import bills spikes by Rs 2,473 Crores.
However, the US assurance to release its strategic petroleum reserves coupled with Saudi’s decision to start 1/3 of disrupted fuel in Aramco, has pegged the price rise to this level. The situation could improve with time.
The drone attacks happened in two of the largest oil fields in Saudi, thereby affecting 50% of Saudi oil supplies. India is one of the prime importers of crude oil from Saudi. History is evidence that such unwarranted attacks spike oil costs by about 10%. If the situation improves in a week, things will be back to normal in India. If the tensions continue, India is in for a hard time.