As Brent hit $98/barrel, the crude oil mix purchased by India, otherwise known as the Indian basket, also rose to $93. 6, marking a $10 increase from November 4, when the Center cut excise duty by Rs 10 on a liter of diesel and Rs 5 on petrol to provide relief from high oil prices ahead of state elections.
Pump prices have remained unchanged since then under an unofficial government decree. The sharp increase has widened the gap between the actual cost and retail prices of petrol and diesel, leading to lower realizations for retailers. According to Ballpark, every $1 increase in the price of crude affects the retail rate by 70-80 paise.
The moratorium on price revision, as seen after the last elections, is expected to be lifted after the last vote on March 7 and retailers will start raising prices. However, they will not be able to completely fill the previous under-recoveries, which will hurt the profits of companies like IndianOil, Hindustan Petroleum and Bharat Petroleum. But on the other hand, higher oil prices will propel lower levels of domestic producers such as ONGC And Oil India Limited
The Ukraine crisis will keep oil on the boil in the coming months to keep fuel prices in check, unless a success in US-Iran talks brings Iranian oil to market. But there will be no supply disruption as India hardly imports oil from Russia through the western route.
But the Ukraine crisis will also hit India with gas prices. India meets half of its gas needs through imports through LNG, or liquefied natural gas. Although India hardly imports LNG From Russia, the crisis has driven up fuel prices. This will increase the cost of the industry.
Rising fuel costs will drive up inflation and lead to a tightening of monetary policy reserve Bank of IndiaRaising the cost of living.
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