The benchmark Brent crude soared above $112 per barrel as fighting intensified in Ukraine. The decision by the International Energy Agency to release crude from its reserves also failed to dampen prices. Higher energy prices could worsen the inflation that is already threatened the economies everywhere and created concern among the central banks.
After the state elections are over in India, state-owned oil retailers are prepared to raise the fuel prices. As per the Petroleum Planning and Analysis Cell of the oil ministry, the Indian basket of crude rose above $102 per barrel compared with $81.5 per barrel when the retailers last raised prices in early November in the previous year.
American Financier John Pierpont Morgan said that, “With state elections getting over next week, we expect daily fuel price hikes to restart across both gasoline and diesel.” The results to the polls will be announced on March 10, 2022.
The brokerage said that the oil refiners need to increase prices by Rs 9 a litre or 10 per cent if they want to normalize their margins. Nomura said that a 10 per cent rise in prices could add 0.4 percentage points to inflation.
The Chief Economist of India Ratings and Research Devendra Kumar Pant said that a 10% increase in the price of crude oil and sunflower alone could push retail and wholesale inflation upwards by 55 basis points and 109 basis points respectively.
He said that, “This will pose a challenge to the Reserve Bank of India to continue pursuing an accommodative monetary policy. Since the government has already undertaken a sharp cut in import duty on edible oil, there is a limited scope for a further cut without impacting the fiscal arithmetic.”