NEW DELHI: US President Donald Trump seems to be on a mission to rock the world. Even as the global trading establishment wades through the fallout from his proposed import tariffs, Trump’s series of tweets over Tuesday and Wednesday sent fears rocketing that an escalation in the Syria conflict was imminent.
Crude oil prices, for their part, rode the consequent supply-side concerns to breach the $72 per barrel mark and hit four year-highs.
“Russia vows to shoot down any and all missiles fired at Syria. Get ready Russia, because they will be coming, nice and new and “smart!” Trump tweeted on Wednesday, following up his Tuesday declaration that the US will respond forcefully to a suspected chemical attack in Syria.
The result was that brent crude, which forms a significant portion of India’s crude oil basket, shot up in value to $72.38 per barrel on the spot market as of printing time.
The same had cost $64.95 per barrel just a month earlier. Analysts say that the geopolitical tensions triggered could see brent go as high as $76 per barrel in the short term.
This is bad news for a large oil importer like India, where fuel inflation is already rising. April, for example, began with diesel prices hitting all-time highs and petrol prices at a four-year peak. Experts say any steady hike, or a lengthy period at current levels, would have negative effects.
“It will put pressure on consumers if hikes are passed along, or on oil companies if they have to absorb it. If excise duties are cut, state revenues will fall when the government is already strapped for cash,” noted a senior official in a state-run oil marketing company.
While the extended rally has been driven by factors like the OPEC production cut and supply constrictions in Venezuela, these have been largely mitigated by surging output in the US.
However, Trump’s tweets have tossed in a new factor to the mix — a more violent middle-east.
This could mean real trouble for India, since agencies like CARE Ratings estimate that every 10 per cent increase in crude oil rates could translate to a 0.35 per cent increase in retail inflation and every dollar increase would mean an extra Rs 10,000 crore to its import bill.