Oil prices are set for a hike and this could mean more trouble for the Indian economy. With a set of 10 drones attacking key oil installations in Saudi Arabia, the world’s oil supply remains majorly disrupted. Who did this is not known immediately.  Yemeni militants have claimed responsibility for the act even as the US strongly feels this is a mischievous act orchestrated by Iran. India being the world’s third largest oil importer, the impact of this in terms of supply constraints and a likely rise in oil prices would be heavy on us.

Notably, India meets 80 per cent of its oil requirements by way of import, which points to the seriousness of the emerging situation. Worse, this comes at a time when the Indian economy is already ailing and the GDP running at a low of five per cent.

The fall in global oil prices had been the major advantage for the Indian economy during the first five years of Prime Minister Narendra Modi. It kept inflation under control, which also meant a certain level of feel-good sentiments for the ordinary masses. They could ill afford a rise in the prices of essentials — in the event of a rise in oil prices. Fear in global oil markets is that the oil prices a barrel could cross the $100mark as a result of the hit the Saudi Aramco now took. Saudi Arabia is the second largest supplier of crude oil and cooking gas to India. The direct result of a rise in oil prices could be that India’s oil import bill will rise sharply, and this could adversely impact on the trade deficit. With every dollar increase in oil price, the import bill will swell by an estimated Rs 10,700 crore, as per one report.

The International Energy Agency, monitoring the situation, has said the present supply position was comfortable and there was no need for excessive worry for global markets. The present reserves could last for a three-month period. But, problems could arise thereafter. Since the US is certain that Iran was behind this act of disruption, retaliatory steps may be expected, which too could further complicate both the geo-political scenario and energy-related matters. All these happen at a time when the global economy is reportedly set for another round of recession. India can at best keep its fingers crossed. These, here, are already testing times.

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