Oil and fuel prices in India are expected to increase after the expiry of Iran’s nuclear monitoring deal with the UN. Another causative factor could be a storm alert in the Gulf of Mexico.
As per a Reuters report, the US National Hurricane Centre said a low-pressure system over Gulf of Mexico had a 60 per cent chance of turning into a cyclone in the next 48 hours. The resulted in a 0.5% price increase in Brent Crude Oil futures for July to $66.7 in the early hours of Monday.
Crude oil price increased by Rs 44, reaching Rs 4,703 per barrel, on the morning of May 24. However, experts are of the opinion that a sharper rise may be witnessed in the coming days.
Speaking to The Observer, Richa Mishra, oil and gas reporter for the Hindu Business Line said: “India is an import-dependent country when it comes to crude oil. A rise in global prices may not immediately impact the prices since we maintain an inventory, but retail oil prices in the country will certainly see a spike in the future as procuring crude oil would become costlier.”
In 2020, US oil production from the Gulf of Mexico was recorded at 1.65 million barrels per day, according to the US Energy Information Administration. This is estimated to increase by 15-20 per cent in the next two years.
India, over the recent years, has increased its dependence on the US for oil imports, with the former ordering close to 5.5 lakh barrels in February 2021.
Another possible factor for global crude oil price increase could be the expiry of Iran’s nuclear monitoring deal which could result in sanctions imposed on Iran.
A.K. Ramakrishnan, a West Asian studies professor at JNU, informed The Observer: “Iran has a great potential to produce oil, which has been restricted to a great extent by various sanctions imposed on it. However, an increase in production by other OPEC countries has motivated Iran to increase its production as well. But further restrictions due to tense world political scenarios can lead to disturbed supply and rise in prices.”
India wanted to continue importing from Iran when the sanctions were dropped, but further sanctions could have an impact on that policy, Mishra added.
Mishra explained that India manipulates retail oil prices, which remain high even when global prices are low. The global per-barrel price of crude oil may not breach the $100 mark, but will average between $60 and $70.
India has witnessed a surge in retail oil prices in the recent months. A further increase in global crude oil prices will not only increase retail prices but will also increase India’s current account deficit.