This Is Not The Last Upswing In Oil Prices; India Has To Make Its Demand For Oil More Elastic. Here’s Why.

This Is Not The Last Upswing In Oil Prices; India Has To Make Its Demand For Oil More Elastic. Here’s Why.

Effective October 1, fuels have become dearer. Indraprastha Gas Ltd raised the price of CNG and of domestic piped gas. Petrol prices were hiked by 24 paise per litre and diesel by 30 paise. The price of non-subsidised LPG was up by Rs 59 per cylinder and subsidised LPG cylinder became costlier by Rs 2.89. All this is an outcome of higher global oil prices and a weak rupee. The media and analysts these days are speculating increasingly on the possibility of crude oil prices reaching $100. This has gained traction ever since Brent crude breached the $80 mark and has sustained itself at those levels.

Brent crude has averaged $75 in the fiscal so far. Much of the rise in prices is attributable to increased conformity (led by fall in output from Venezuela) towards the output deal by the OPEC and other cooperating nations, and the sentiments around US sanctions on Iran oil exports that come into force starting November. At its latest JMMC (Joint OPEC-non-OPEC Ministerial Monitoring Committee) meeting in September, the OPEC and other cooperating nations seemed to have paid little heed to the US President’s rhetoric to bring down oil prices. The group of nations expressed satisfaction regarding current oil market outlook, with an overall healthy balance between supply and demand. There are no signs telling the OPEC would increase output—its next meet is scheduled for December 3. The future course of output cooperation deal will become known then. But, in recent months, Russia and OPEC have hinted multiple times at a long-term output cooperation. Pipeline constraints in the US prevent US shale industry to pump out more oil and make it available to the market. With excess oil inventories gone, prices have become very sensitive to any supply-side news. On the demand side, oil demand remains strong and is yet to show any signs of weakening. Read more

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