Despite Rise In Global Crude Prices, Your Fuel Costs May Remain The Same

The rise in global crude prices may push up India’s import bill and lead to a higher current account deficit, but common citizens may be spared from paying extra for their fuel.

Even as global crude oil prices have been steadily increasing since the Iran-Israel war started a week ago, supplies have remained undented.

Brent oil was priced at US$65 per barrel before the conflict. 

Speaking to The Secretariat, Petroleum and Natural Gas Minister Hardeep Singh Puri said that there was no cause for concern for India.

“I don’t expect prices to go up significantly. Even if they do go up in the short term because of escalation, there is enough oil available,” the minister said.

“The supply routes for oil have remained operational,” he said, adding that the conflict will not help the other oil-exporting countries in the region either. 

India, which requires about 5.6 million barrels of oil a day, has aggressively diversified its supplies of oil. “India's supplies have diversified, so there is no problem in terms of availability,” Puri said.

The West Asian countries including Saudi Arabia and UAE have been traditionally supplying oil to India. But in the last few years, India’s imports from Russia have significantly increased. India has also been importing sizeable quantities of oil from the US.

Policy watchers expect prices to remain below US$ 80 a barrel in the medium term.

Soumya Kanti Ghosh, Group Chief Economic Advisor to the State Bank of India (SBI) and member of the Economic Advisory Council to the Prime Minister said that though India’s import bill may expand it is unlikely to lead to inflationary pressures.  

“Even if it costs US$ 80, it is manageable. The important point to note is that as long as there is no impact on the consumer prices — there is no impact. If there is no changes in the excise duty, I don't think that is getting passed on to the consumer,” Ghosh said.

A higher fuel price directly impacts inflation and eats into the purchasing power of people.

Spare Oil Capacity Exists

In 2024, Iran produced about 3.3 million barrels of crude oil per day.

Fitch Ratings, in its recently published report, said that in the unlikely event that all Iranian exports are lost, they could be replaced by spare capacity from OPEC+ producers — and that could be around 5.7 million barrels a day. 

“Our assumption is that the fighting will remain contained between Israel and Iran, and will not persist for more than a few weeks,” the report said.