Global crude oil prices crossed $108 per barrel on Tuesday causing more worries for India's macro-economic managers grappling for options to contain prices without upsetting the growth.
The price of Indian basket of crude oil is at $101.7 per barrel amidst concerns that it could rise further amid mounting political unrest in Libya.
While Libya alone doesn't produce so much oil that there would be a supply shortage but oil experts fear that if the revolt in Libya spreads to other major oil producers in the Middle East and North Africa, this could impact supplies of crude oil flowing into major oil importing countries.
India imports two-third of its crude oil requirements from the Middle East.
"The Libya situation could also lead to supply constraints resulting in high crude oil prices if its impact spreads to oil producers in the Middle East," an oil company official said.
This could pose another set of worries for the government's economy managers barely five days ahead of presentation of the budget who are battling to cool prices.
Food price inflation was at 15.6% at January-end. Food prices have knocked up prices of other goods also.
India, which imports about 70% of its total crude requirement, faces the twin challenges of containing the import bill and maintaining retail fuel prices at reasonable levels.
Oil imports during April-January stood at $30 billion, up 14% as compared to the year-ago period.
At current global prices, oil firms are losing Rs 3 as revenue on every litre of petrol sold and more than Rs 10 on every litre of diesel.
Concerns over high inflation have forced the government to delay plans to cut fuel subsidies, although petrol pricing was freed last year.
"The possibility of another petrol price hike has arisen again on the back of mounting global oil prices," the official said even as government officials refuted the possibility of another petrol price hike.