Yemen’s Houthi rebels attacked an oil facility in the UAE, disrupting supplies. The world’s oil reserves are also dwindling.
Due to rising geopolitical tensions and supply constraints, crude oil prices in the global market reached $87.7 per barrel on Tuesday. This is the highest level seen in seven years, dating back to 2014. Despite this, petrol and diesel prices in the domestic market remained unchanged for the 74th consecutive day.
When petrol and diesel prices were at an all-time high in the country, Brent crude was trading at around $ 82 per barrel globally. By the end of December 2021, it had risen to $ 68.87 per barrel. However, as soon as the new year began, Brent crude prices began to rise again.Now it is $87.7 a barrel.
Indeed, Yemen’s Houthi rebels have disrupted supplies by attacking an oil facility in the UAE. The world’s oil reserves are also dwindling. Analysts believe that, as a result of this attack, tensions between Iran and Saudi Arabia, two West Asian neighbours, may rise.
For the past two and a half months, prices in the domestic market have not risen.
Despite a recent increase in crude oil prices, there has been no increase in the price of gasoline and diesel in the domestic market in nearly two and a half months. Petrol is priced at Rs 95.41 per litre in Delhi, while diesel is priced at Rs 86.67 per litre.Following the reduction in excise duty, the prices of gasoline and diesel have remained at this level as a result of the reduction in VAT at the state government level as well.
There will be no price increases as a result of the elections.
The prices of petroleum products in the country are set by oil marketing companies. Despite the rise in global prices, companies are not raising petrol and diesel prices in the United States due to assembly elections in five states. Even during the ongoing elections in Punjab, Goa, Uttarakhand, Uttar Pradesh, and Manipur in 2017, the companies did not raise their prices from January 16 to April 1, 2017.
The federal government’s budget will deteriorate.
According to estimates, a $10 increase in crude oil prices increases the fiscal deficit by 10 basis points.
India imports a large amount of crude oil, and increasing the oil import bill increases the current account deficit. Inflation will rise as well, making it difficult for the RBI to maintain its current policy rates.
Because of the increase in import bills, the dollar reserve will decrease, causing the rupee to weaken.
As a result of the rise in crude oil prices, the government’s balance sheet will be completely ruined.