The price of the Indian basket of crude oil crossed the $100-mark for the first time on Tuesday as the global oil market scaled a new peak, stoking fears of inflation and widening trade deficit for oil importing countries across the world.
Making it worse, the International Energy Agency that advises 27 industrialised countries warned of hardening oil prices in the coming months. “We are in an era of higher oil prices…prices are unlikely to return to levels seen in the early part of this decade,” the Vienna-based agency said in its monthly report.
India, which imports about 75 per cent of the crude oil it needs annually, has already seen its oil import bill soaring in recent months and that will only get worse in the coming months. But more importantly, the latest spike in crude prices would further hit profitability of government-owned oil companies, which have not been allowed by the government to increase prices of petrol and diesel in line with changes in the global market.
“It will surely have an inflationary pressure, more so in unregulated products such as aviation turbine fuel. Moreover, the import bill will go up and widen the trade deficit,” said DK Joshi, Principal Economist of credit rating and consulting firm Crisil.
Oil imports during January were valued at $7.7 billion—up by a staggering 60.81 per cent as compared with the same month in 2006. During the first ten months of the 2007-08 (April to January), oil import bill touched $57 billion, which was 16.5 per cent higher than the previous year’s $ 48.95 billion in the same period last year. The result: India’s trade deficit which widened to $67.41 billlion during April to January 2008 as compared with $ 45.7 billion in the same period of the previous year.
In Parliament, Minister of State for Petroleum and Natural Gas Dinsha Patel said: “The government is closely monitoring the international oil prices and will continue to protect the interests of consumers.”
Last month, the government raised prices of petrol by Rs 2 and that of diesel by Re 1 a litre, a hike that was considerate very moderate given the sharp rise in global prices.