The price of crude oil is a major factor in the economy of a number of countries, including India, making it one of the most important commodities on a worldwide scale. The demand for oil in India has been growing steadily over the past several years, making the country the third-largest importer of oil in the world.
The recent rise in the price of crude oil in India has been a source of concern because of the effect it has had on the overall rate of economic expansion in the country. In this article, we will explore the trend of crude oil prices in India, as well as the variables that determine crude oil prices in India, and the impact that crude oil prices have on the economy of India.
Crude Oil Price Trend In India
During the course of the last decade, there has been a discernible shift in the price of crude oil in India. In 2011, the price of a barrel of crude oil was over $110, but as a result of a worldwide oil glut, that price dropped to $30 in 2016.
The price of crude oil, on the other hand, bounced back from its lows and reached approximately $85 per barrel in October of 2018. From March 2019 through March 2020, the price of a barrel of crude oil stayed within a range of $60 to $85. Despite this, the COVID-19 epidemic and the oil price war between Russia and Saudi Arabia prompted crude oil prices around the world to drop significantly.
The COVID-19 pandemic resulted in a decrease in demand for crude oil, which led to the price of a barrel of crude oil falling to an all-time low of approximately $20 in April of 2020. The price of crude oil, on the other hand, began to climb again in the second half of 2020 and eventually reached approximately $60 per barrel in February of 2021.
In March 2021, the price of a barrel of crude oil in India was approximately 4,600 rupees, which was lower than the level it had been at before the epidemic but higher than the level it had been at in April 2020.
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Factors Affecting Crude Oil Prices In India
The price of crude oil in India is influenced by a number of different factors. The following are some of the key factors that influence the price of crude oil in India:
Demand and Supply on a World Scale The prices of crude oil in India are significantly influenced by both the demand and supply of crude oil on a global scale. When there is an excess of supply on the global market for crude oil, however, prices have a tendency to go down, while when there is a lack of supply, prices tend to go up.
Currency Exchange Rate The ratio of the value of one unit of the Indian rupee to one unit of the United States dollar is another factor that influences the cost of crude oil in India. Because of the global standard of pricing crude oil in US dollars, a decline in the value of the Indian rupee will result in an increase in the price of crude oil in India.
Geopolitical Issues The price of crude oil in India is affected by geopolitical factors such as political instability, wars, and other conflicts that occur in oil-producing countries. The price of crude oil tends to increase if there is a disruption in the oil supply chain brought on by geopolitical concerns.
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Impact Of Crude Oil Prices On The Indian Economy
The price of crude oil has a considerable bearing on India’s economy. The Indian economy is highly dependent on oil imports; hence, any increase in the price of crude oil translates to an increase in the amount that must be paid for imports. This results in a trade deficit, which places strain on the nation’s foreign exchange reserves and should be avoided at all costs.
The higher the price of crude oil is, the higher the cost of transportation and the cost of making things will be as well. This will lead to an increase in inflation. This causes a spike in the pricing of necessary items, which in turn reduces the average person’s ability to make purchases.
The high prices of crude oil also contribute to a decline in the amount of money that people have available to spend, which has an effect on the level of consumption in the economy as a whole.
Yet, the rise in the price of crude oil is advantageous to the local oil industry because it results in an expansion of both revenue and profitability. The rise in revenue also results in a rise in the amount of money collected by the government in the form of taxes.
To summarize, the price of crude oil in India has been subject to a large amount of volatility in the recent past. The price of crude oil is influenced by a number of different factors, including global demand and supply, the rate of currency exchange, and geopolitical considerations.