New Delhi: Crude oil prices are increasing continuously due to the stir in global politics and less concern about the corona variant Omicron. At present, crude oil has risen to $ 87 per barrel, which is a 7-year high. This is the fifth consecutive week on a weekly basis when crude oil is on the rise. This is the record rise in crude oil since October 2014.
Experts say that at this time the demand for crude oil is high and the supply is less. So the price is increasing. The rapid increase in trading activities across the world has led to an increase in the prices of crude oil. This will make it difficult for the Government of India to control the price of petrol and diesel. This may shock the customers.
Why did crude oil prices rise sharply?
Yemen’s Houthi opponents blasted an oil tank in Abu Dhabi on January 17, 2022. In this 3 civilians died. This attack was done with the help of drones. This was the second attack by Houthi rebels this month. The Houthi rebels are doing this to block oil production. After this incident, the prices of crude oil have increased sharply.
How much has the price of crude oil increased
Crude oil was at $ 69 per barrel on 1 December 2021. In just six weeks, it has jumped by nearly 25 percent. Analysts say that there is no prospect of an increase in oil production capacity. There is also no new investment to increase production. The clouds of crisis are dissipating because of Omicron. In such a situation, the price is increasing rapidly in demand.
How expensive can crude oil be?
Morgan Stanley estimates that by the third quarter of this year, the price of crude oil will reach $ 90 per barrel. Recently, the Energy Information Administration (EIA) and Bloomberg reduced the oil production capacity of OPEC countries to 8 lakh and 1.2 million barrels per day for the year 2022. After this report, JP Morgan has predicted a rise in the price of crude oil up to $ 30 per barrel in the coming days. According to him, the price of crude oil can reach $ 125 this year and $ 150 by 2023.
How can the government’s budget be spoiled?
According to estimates, if the price of crude oil increases by $ 10 per barrel, then it increases the fiscal deficit by 10 basis points.
India imports crude oil on a large scale. With the increase in the oil import bill, the current account deficit (CAD) also increases.
With this, inflation also rises, which will make it difficult for the RBI to keep policy interest rates liberal.
Due to an increase in the import bill, the dollar reserve will decrease, due to which the rupee will weaken.
In this way, due to the jump in crude oil, the balance sheet of the government will be completely spoiled.
