Image Credit: corporatefinanceinstitute.com
The global crude oil prices almost reached the $75 mark on Wednesday, compounding the pressure on the Indian economy at a time when the prices of petrol and diesel are already pinching the pockets of the consumers. In the Sri Ganganagar district of Rajasthan, both petrol and diesel prices have now crossed the Rs 100 mark.
The crude oil prices which had hit a record low with the advent of the pandemic last year have now witnessed a year-over-year increase of over 85% or $33 per barrel. The world’s major economies- United States, Europe and China are recovering fast, driving up the demand for the petroleum product. Governments across the world are spending heavily on infrastructure and other economic activities to bring their economies back on track. India, which is the world’s third-biggest oil consumer is also in recovery mode after a deadly second wave of COVID-19.
As global transport is slowly opening up due to increased vaccination and loosening of restrictions, people are travelling more leading to increased fuel prices. The start of the summer driving season in the US is expected to further drive up oil prices.
On the supply side, the cartel of oil-producing nations, OPEC, is exercising caution in increasing production, worsening the situation for heavily oil-dependent countries like India. Another problem is the lack of Iranian oil in the export market due to US sanctions on the country. The negotiations to lift the sanctions are ongoing in Vienna, Austria but are proceeding at a slow pace.
Meanwhile, the continuous rise in petrol and diesel prices in India are hurting the consumers and affecting the country’s prospects of economic recovery. On Thursday, the prices of the two fuels remained unchanged providing some relief to consumers. In the national capital, prices of petrol and diesel stood at Rs.96.66/litre and Rs.87.41/litre respectively. In Mumbai, petrol retailed at Rs.102.82 for a litre while diesel cost Rs.94.84/litre.