Hostilities between Russia and Ukraine, along with sustained demand, is expected to keep global crude oil prices in the range of $95-to-$125 per barrel in the short term. At present, India imports 85 per cent of its crude oil needs.
Besides, the cascading effect of higher fuel cost will trigger a general inflationary trend. Already, India’s main inflation gauge Consumer Price Index (CPI) which denotes retail inflation, has crossed the target range of the Reserve
Bank of India in January.
The rise was blamed on high commodities costs. As per industry calculations, a 10 per cent rise in crude oil prices adds nearly about 10 basis points in CPI inflation.
Lately, the crisis as well as fears of lower supplies have pushed Brent crude oil price to 10-year-high level of nearly $120 per barrel.
On Friday, the Brent-indexed crude oil stood at $113.76 per barrel from a 10-year high of $119.84 per barrel a day
Currently, Russia is the third largest producer of crude oil in the world. It is feared that sanctions against Russia will curtail global supplies and stifle growth.
Tapan Patel, Senior Analyst (Commodities), HDFC Securities says, “The higher oil prices has raised market expectations that govt of India may hike fuel prices post UP elections, expecting rise by Rs 10-15 per litre.”