After being insulated from an increase in the domestic fuel prices, the ongoing upsurge in global crude oil prices could spoil the party for Indian consumers of petrol and diesel. India imports 80% of its crude oil requirements and any upward movement in oil prices casts an impact on domestic prices of petrol and diesel.
Domestic oil companies announced an increase in prices of petrol and diesel by Rs 1.29 and 0.97 a litre in petrol and diesel respectively from Monday (January 2, 2017). Experts feel that more such hikes could follow if crude and product prices in the global oil market continue the upsurge.
The sudden increase in oil prices in international market follows decision of oil cartel-OPEC to cut production.
The volatility in oil prices can be witnessed from the fact that from levels of $26 a bbl in February, crude oil prices touched the highs of $55 in December, up 15% since OPEC decision on production cut.
Every one dollar increase in global crude oil prices, the exchequer will have to shell out an additional Rs 9,126 crore every year.
With high oil prices, India’s oil import bill for 2016-17 will be much above the estimated $66 Bn worked at an avg import price of $48bbl.
India’s oil import bill was $64bn in 2015-16, $113 bn in 2014-15 and $143 bn in 2013-14.
High oil import bill will therefore mean that the country will have to fight a higher Current Account Deficit.
For consumers, high prices will mean paying more for their fuel and air ticket bills. High oil prices has a cascading effect on all sectors thereby triggering inflation.
Low crude oil prices during 2015 and early months of 2016 had kept inflation under check thereby helping the government to trim CAD.