Crude jumped 18 per cent to above USD 107 a barrel, its first time above the USD 100 level since July 2022, after Russia’s invasion of Ukraine. International benchmark Brent crude added 16 per cent to above USD 108 a barrel, as per media reports. Middle East producers have slashed their output, amid the closure of Strait of Hormuz, located between Oman and Iran, and the vital artery for global energy trade.
US President Donald Trump said gain in short-term oil prices was a small price to pay for destroying Iran’s nuclear threat.
India imports 85 per cent of its crude oil requirements. 40- 50 per cent of crude oil and 50-60 per cent are shipped through the Strait of Hormuz.
The Department of Economic Affairs, under Union Ministry of Finance in its latest monthly economic review said the scenario building exercises on the macroeconomic impacts of higher oil prices suggest that crude oil prices must remain above USD100 per barrel for a sustained period for macroeconomic aggregates to reflect the strain.
But there are large unknown unknowns in several other areas. Crude oil may be one obvious stress marker, but the supplies of natural gas and cooking gas also matter. The safety of sea lanes matters for overall exports and capital flows, it added.
There are other sectors whose prospects are tied to crude oil prices. In case of Paints and specialty chemicals sector 30 per cent of the production cost is linked to crude oil prices and about half of the operating cost for the sector is linked to crude prices.
Read more: https://industrialeconomist.com/west-asia-conflict-a-look-at-potential-sectoral-impact/
