New Delhi, First Published Feb 23, 2022, 2:52 PM IST
As the tense situation between Ukraine and Russia worsens, it will reverberate with crude oil prices and in India. The cost of importing crude oil to India in particular may increase.
As a result, domestic retail inflation is likely to rise further and petrol and diesel prices are likely to rise. If the federal government wants to reduce retail inflation, it can only do so by lowering taxes on petrol and diesel.
Russian supporters in the two states of Donetsk and Luhansk in the Donbass region of eastern Ukraine recently met with President Putin and demanded that their states declare independence. Accordingly, Russian President Vladimir Putin declared the two states of Donetsk and Luhansk as independent states. Russia has also sent its troops into the two areas.
Following this, the United States, Britain and European countries have issued sanctions against Russia for indirectly invading Ukraine and violating international agreements. US warns of tough sanctions on Russia if Ukraine escalates tensions
If sanctions are imposed against Russia, it will pose a problem in the export of crude oil and natural gas to Western and European countries. This will make it impossible for European countries to meet demand.
However, India imports very little crude oil and natural gas from Russia. These sanctions on Russia will indirectly affect India, though not directly.
In a statement issued today, ICICI Securities said, “As crude oil prices rise in the international market, domestic retail inflation will rise. Therefore, the Reserve Bank may raise interest rates on loans at the next monetary policy meeting. Or the federal government should reduce the excise duty on petrol and diesel. Otherwise petrol and diesel prices will rise sharply and affect the livelihood of the middle class.
As Russia encroaches further into Ukraine, the United States may impose tougher sanctions. Russia’s crude oil and gas exports will then be affected, leading to higher oil and gas prices in European countries. If this happens, the price of crude oil could go above $ 100. But if the Russia-Ukraine issue ends smoothly, crude oil prices are likely to fall to $ 70 a barrel in the second half of the year.
India imports very little crude oil and gas from Russia. Indian companies do not want to refine that crude oil because Russia exports hard crude oil, and transportation costs are high. Therefore, the impact on the Indian economy will be minimal, but it will have a direct impact on international crude oil prices and thereby impress India. Russia holds 11% of international crude oil exports.
As sanctions on Russia increase, global crude oil and gas supplies will be affected by up to 60 percent, and the price of crude oil could rise to $ 110 a barrel.
If the Iran-US nuclear deal is negotiated smoothly, most of Iran’s crude oil will reach the world market. That way, crude oil prices can be kept within $ 100 a barrel. ”
In an interview yesterday, Union Finance Minister Nirmala Sitharaman said, “Crude oil prices have reached $ 100 a barrel due to Ukraine-Russia tensions. This is a threat to India’s financial stability. The central government is constantly monitoring the price of crude oil, ”he said.
Last Updated Feb 23, 2022, 2:52 PM IST