Oil prices edged lower on Wednesday as the market took a breather on expectations Opec may raise supplies as early as June, although geopolitical risks kept a floor under the market.
There was no directive from the government to cap oil prices in the run-up to the Karnataka Assembly elections, state-run oil company, Indian Oil Corporation said today, addressing the issue on spurt in fuel prices in the last nine days, right after the elections in the southern state on May 12.
Prime Minister Narendra Modi and the rupee face a similar predicament — old foes have re-emerged to keep them in check.
With global crude oil prices hovering at record high levels, India is staring at a ballooning of fuel subsidies up to Rs 53,000 crore in the current financial year ending March 2019. State-owned Oil and Natural Gas Corp (ONGC) and Oil India (OIL) may have to bear a large part of the burden impacting their financials, according to Moody’s Investors Service.
The government said on Friday the recent spurt in global rates is a matter of concern as it could inflate import bill by as much as $ 50 billion and impact current account deficit (CAD). However, it remained non-committal on cutting excise duty to ease the burden from rising oil prices.
As brent crude oil prices hit $80 per barrel for the first time since late 2014 on looming US sanctions on Iran, the impact on India is not far away since it imports nearly 80 percent of its oil consumption from abroad.
Rapidly rising oil prices have changed investors’ outlook on stocks of upstream oil companies in the domestic market. India is an attractive exploration and production (E&P) location with significant yet-to-find reserve potential.
As oil prices zoom to $80 a barrel, India has received assurance of ‘stable’ supplies and ‘reasonable’ prices from Saudi Arabia, the influential producer that has itself been working overtime with other key producing countries to jack up prices.
The government on Friday indicated that it may not lower duties on fuel immediately, a move that will mean that pump prices for petrol and diesel may keep rising in line with rising global crude oil prices, while pushing up India’s oil import bill by $25-50 billion during the current financial year.
Even as monsoon is predicted to be normal this year, its uneven distribution could spike food prices, and inflation is likely to edge further, says a report.