With rising Middle East tensions, get ready for a price spike in petrol and diesel. Middle-East, the world major oil supplier has been on the boil after United States killed leading Iranian military commander Qassem Soleimani on Friday.
Iran has vowed vengeance as Soleimani was the architect of its growing influence in the Middle East. His killing has heightened the fears of a conflict escalation in the Middle East that could hurt crude supplies in the region.
Experts feel that the price spike seen today as opposed to the attack on Aramco is not driven by a supply disruption. As such a price rise due to supply disruption carries the risk of sending prices sharply lower once the situation stabilizes. So there could be
a short-term rise in oil prices but if it is demand driven, prices could keep rising.
“Heightened militaristic actions will generate a risk premium for oil prices as traders deliberate escalating tensions in the Middle East. Oil prices look poised to trade higher as markets look towards tighter supply levels and looming geopolitical concerns.”feel experts.
For India, military attacks on Iran could lead to higher oil prices in domestic markets. Tehran meets more than ten percent of India’s oil imports and New Delhi is the second biggest buyer of Iranian crude oil after China. India imported over 24 million tonnes of crude oil from Iran till March 31, 2019.
Despite downside in oil market with Brent oil consolidating in the $63-68 range during Nov-Dec, the petrol prices in India were never cut down. In fact, prices were raised despite ease in international prices.Prices of petrol have been on the upswing since December 26 and that of diesel since November 29, 2019. Diesel prices have increased by Rs 2.78 per litre over this period while petrol has become costlier by 91 paise. India has the history of charging people for higher prices but not passing the benefits of lower international prices.
On Sunday Petrol and diesel prices were increased for fourth day in a row as oil prices jumped to the highest level in more than three months. And if the Middle-East tensions persist, prices could rise rapidly. Just wait and watch.