Brent Crude Crosses USD 95, How Will Costlier Oil Affect India?
Mumbai: Brent crude has crossed USD 95 a barrel as renewed fighting in West Asia raises fears of supply disruptions. Prices have climbed about 20 percent from nearly USD 79 in early July, reversing the decline seen during a brief period of calm. Crude traded between USD 88 and USD 97 over the past week after US strikes along Iran’s southern coast on 31 August and retaliatory attacks by Iran. The…
Brent crude oil prices surged past USD 95 a barrel recently, following renewed unrest in West Asia that has heightened concerns about potential supply disruptions. The price jump, which has risen about 20 percent since early July, signals a reversal of a brief downward trend. Over the past week, crude traded between USD 88 and USD 97 as US strikes on Iran's southern coast and retaliatory attacks by Iran have stoked uncertainty over regional exports.
Given that India relies on imported crude oil for nearly 90 percent of its needs, this price surge poses significant challenges. In the fiscal year 2026-27, India's oil import bill amounted to around USD 123 billion. A one-dollar increase in crude prices sustained for a year could add roughly Rs 18,000 crore to this cost. As markets responded to geopolitical tensions, opening lower, the price hike could fuel inflation, undermine economic growth, and widen India's current account deficit if passed on to consumers.
The Strait of Hormuz has become a supply bottleneck, with its closure reducing the flow of crude from the region by roughly 20 percent. Indian refiners have sought alternatives, turning to Russia, the US, and Venezuela for supplies. However, these sources often entail longer shipping routes and heavier crude grades, driving up processing and transport expenses.
Despite these hurdles, India's demand for petroleum products remains strong. In August, petrol consumption rose by 7.88 percent year-on-year to 3.82 million tonnes, while diesel demand increased by 6.46 percent to 7 million tonnes. This growing demand will further strain India's import requirements. The country now sources oil from approximately 41 nations, with ongoing efforts to diversify suppliers.
The Rs 84,000-crore Samudra Manthan offshore exploration scheme also aims to augment domestic production, with India's eastern and western offshore basins believed to hold over 5,600 million metric tonnes of oil-equivalent hydrocarbon potential.
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