Excessive increase in petrol and diesel prices: Inflation will rise

In the wake of the war, international crude oil prices rose above USD 120 per barrel last week for the first time in nine years. Fuel prices will rise after the results of various state assembly elections are announced this week. At present, Rs. Prices are likely to rise sharply from 10 to 12. According to the Petroleum Planning and Analysis Cell of the Ministry of Oil, India's basket of crude oil purchases rose to ૧ 114.5 a barrel on March 8, the highest since 2014. At the time when petrol and diesel prices stabilized in early November last year, the Indian basket of crude oil averaged ૫ 71.8 a barrel. Now with the state elections coming to an end next week, the rise in daily fuel prices for both gasoline and diesel is expected to resume.

Auto Fuel Net Marketing Margin Minus Rs. 3.5 per liter and from FY22 to today's Q4, Rs. However, on March 17, the net margin fell to minus Rs. 10.1 per liter and on April 1 minus Rs. 12.5 may occur. A sharp decline in net auto fuel marketing margins on a quarter-on-quarter basis requires a sharp rise in prices as the strength of the gross refining margin is not sufficient. Crude oil prices have been rising since Russia last month deployed troops on Ukraine's border. Prices have risen sharply amid fears that oil and gas supplies from Russia could be disrupted. Russia accounts for one-third of Europe's natural gas and about 10 percent of global oil production. About a third of Russia's gas supply in Europe usually passes through a pipeline crossing Ukraine.

Russian supply to India is very low. While India imported 2,200 barrels of oil per day from Russia in 2021 (about 1 per cent of its total imports), coal imports from Russia were 1.2 million tonnes in 2021 which was 1.3 per cent of all coal imports. India also buys 4.5 million tonnes of LNG a year from Russia's Gazprom. Domestic fuel prices, which are directly linked to international oil prices as India imports 5% of its oil requirements - have not been updated for 150 consecutive days.

The main reason behind the rise in crude prices in the international market is the war between Russia and Ukraine. If this war goes on for a long time, there is a possibility of a resurgence of supply disruptions in the 180's.

The sanctions imposed on Russia's banking system by the United States and its allies have created a backlash against Russia's oil. Many of the world's banks, ports and cargo ships are currently choosing to stay away from Russian crude oil.

The current crude oil crisis looks like a ban on Arab oil in the 1960s and a crude oil crisis during the Iranian revolution, sources said. Both of these events shook the crude oil in the 180's.

Although the United States and its allies have not yet imposed sanctions on Russia, significant amounts of Russian crude oil have disappeared from the market. Russia exports 3 million barrels of oil and processed goods daily.

This will continue to be a major logistical hurdle and people will be clamoring for crude oil, the sources added. In addition to the supply crisis, this is also a logistics and payment crisis and it could be like the 150's.