Oil, gas prices spike as conflict expands
As the US-Israel-Iran conflict entered its third day on Monday, international oil and gas prices rose sharply. On Monday, Saudi Arabia’s national oil company, Aramco, shut down a refinery as a precautionary measure, while Qatar’s State owned QatarEnergy suspended production of Liquefied Natural Gas (LNG), even as at least three ships were attacked near the Strait of Hormuz at the weekend. The waterway to the south of Iran transports about 20 per cent of the world’s oil and gas supplies.
International crude oil prices have risen over 10-13 percent while prices of natural gas has spiked by nearly 50 per cent. India is the world’s fourth-largest buyer of LNG. Further, according to Government data between 2.5-2.7 million barrels per day of India’s crude imports move through the Strait of Hormuz, primarily sourced from Iraq, Saudi Arabia, the United Arab Emirates and Kuwait.
Union Minister for Petroleum and Natural Gas, Hardeep Singh Puri reviewed the supply situation for crude oil, LPG, and other petroleum products with senior officials from the ministry and public sector companies. “We are continuously monitoring the evolving situation and all steps will be taken in order to ensure availability and affordability of major petroleum products in the country,” the ministry posted on social media.
Retail petroleum prices have been frozen since April 2022, with oil marketing companies absorbing losses when crude prices are high and making profits when rates are low.
Retail fuel prices are not expected to be raised immediately, as the Government continues to follow a calibrated policy of allowing companies to build margins when international prices are low and cushioning consumers when rates rise, sources said. The Government wants to continue to shield consumers and the same policy will continue unless there is a huge spike in crude prices, according to sources. With assembly elections in critical states like West Bengal, Tamil Nadu, and Assam round the corner, it doesnt want anything that could give the opposition a handle.
“They (oil companies) have enough cushion to sustain this kind of prices spike,” a source with direct knowledge of the matter said. “We have seen prices rise to $119 per barrel in June 2022 in the aftermath of the Russia’s invasion of Ukraine. That year they had nominal profits but in FY24 they posted record INR 81,000 crore profit.”
“While Iran supplies 4.5-5 per cent of global oil, the main concern is disruption at the Strait of Hormuz which is vital for almost half of India’s imports of both these commodities, thus increasing vulnerability,” said Sehul Bhatt, Crisil Intelligence Director. “Sustained disruptions would keep crude prices elevated and tighten LNG availability underscoring the need for strategic planning to protect India’s energy security,” he added.
Conflict wipes out INR 8 Lakh Cr Wealth
New Delhi: The bloodbath on Dalal Street translated into a massive erosion of investor wealth as the conflict between Iran and Israel entered its third day on Monday. Total market capitalisation on the BSE slid by more than INR 7-INR 8 lakh crore, dropping from nearly INR 463 lakh crore on Friday to about INR 454 lakh crore during intraday trade. The rupee saw a steep loss of 41 paise to settle at 91.49 against the US dollar on Monday after US and Israeli attacks on Iran intensified worldwide risk aversion, setting crude oil prices on fire and demand for the American currency soaring.
The conflict has spread in the entire Middle East which may start hitting the common man as prices of household staples items are expected to be impacted too if it persists. At the same time, exports of rice, textiles, gems, electronics, and IT services face delays and higher costs.
