The global crude prices are rising ever since the Covid-19 crisis, but it has surpassed the benchmark of $80-per-barrel on Tuesday, the highest ever inflation in recent years.
Moreover, the successive shortage of gas in Europe and Asia further boosted the demand for oil for power generation, which may lead to a further spike in the prices in the upcoming months.
The reason behind the hike in crude prices
Not only India but the whole world has suffered throughout the Covid-19 crisis and this is the major reason why the oil-producing countries decreased their oil production.
In Feb 2020, Saudi Arabia discontinued the extra supply because of the low demands.
In early Jan 2021, the Organization of the Petroleum Exporting Countries (OPEC) and Russia made an agreement to cut down the crude oil production, which additionally increased the rates.
After the pandemic, the economy and the industries once again began to rise as the globe was back to work again, thus promoting the demand for crude oil. The growing need for oil all around the world accentuates the situation regarding crude prices rise.
Why is it affecting India?
India is one of the biggest importers of crude oil, fulfilling the requirements with 80% of the import. India imports mainly from OPEC countries, so Brent is the criterion for oil prices in India.
Although, Brent Crude is generated near the sea which reduces its transportation expense in comparison to the WTI crude which is produced in landlocked areas, the recent spike in Brent Crude Oil led to an increase in India’s import bill, and it similarly entailed the twin deficits- fiscal and current account deficit.
The government of India has raised the central and state levies on petrol by 58.62% and by 52.85% on diesel to boost the revenues. In the capital Delhi, the cost per litre for petrol is Rs. 92.58 and Rs. 88.02 for diesel. This price surge has caused havoc among the population.
The scarcity of coal supplies in China further deteriorates the situation.