NEW DELHI: With crude oil prices more than doubling in one year and posing a threat to emerging economies, world's third biggest oil consumer India saw rates touching USD 60 a barrel before retracting.
A deal between OPEC and non-OPEC members to cut output for the first time since 2008 has led to a 15 per cent surge in crude oil prices in the last two weeks. Brent crude oil prices have more than doubled from a low of USD 27.88 a barrel recorded in January to hover at USD 55. The rise not only threatens the fiscal maths of a nation that is 80 per cent dependent on imports to meet its oil needs but also may spur inflation.
A top official said the government does not see any immediate sense of alarm as oil prices have retracted from the 17-month high following the US Federal Reserve raising interest rates for the first time this year.
Brent fell USD 1.82, or 3.3 per cent, to USD 53.90 a barrel.
"We expect oil prices to reach USD 60 and then it will come down," the official said. The slump in oil prices has been a bid factor that has helped Indian economy notch up big gains by cutting its import bill and reining in inflation.
India, which depends on imports to meet 80 per cent of its oil needs, will have to spend Rs 9,126 crore (USD 1.36 billion) more every year for one dollar per barrel increase in crude oil. Besides, the rising crude oil trajectory impacts inflation and growth. India spent USD 63.96 billion on crude oil import in 2015-16, about half of USD 112.7 billion outgo in the previous fiscal and USD 143 billion in 2013-14.
For the current fiscal, the import bill has been pegged at USD 66 billion at an average import price of USD 48 per barrel.