On Friday, the price of Brent crude (crude oil) rose 4.5% to $ 69.23 a barrel after a top Iranian military officer was killed in a US airstrike. The rupee fell 42 paise to end at a one-and-a-half month low of Rs 71.80 per dollar. Petrol and diesel prices in India may also increase after the rise in crude oil prices and the fall in the value of the rupee.
According to Kedia Commodity Director Ajay Kedia, if Iran retaliates against the US, the price of crude oil could reach $ 75 to $ 78 per barrel in this quarter. This may cause the rupee to slip to Rs 75 against the dollar. If this happens, the price of petrol can once again reach Rs 90 per litre.
Rockets fired from American drones hit Iraq’s Baghdad International Airport late Thursday, killing Maj Gen Qasem Soleimani, the head of Iran’s elite Quds Army. If tensions in the Iran-US relations escalates, crude oil will become expensive worldwide as both countries are major oil exporters.
Currently, Iran’s oil exports have been greatly reduced due to US sanctions. This may further reduce in the event of further US-Iran conflict. The supply from other oil-producing countries of the Middle East can make a difference as the route through which these countries supply oil passes through the maritime border of Iran. Iran can close this route in the event of a war-like situation. Due to these fears, the prices of crude oil rose in the international market and the dollar strengthened.
Petrol prices are currently between Rs 75 and Rs 81 per litre in the four major cities of the country. Petrol costs Rs 75.45 in Delhi and Rs 81.04 per litre in Mumbai. In Bhopal, it costs more than Rs 83.
Between January and March, the price of crude oil could reach $ 78 if the tension between US-Iran increases and the supply of oil decreases. The rise in the price of crude oil will cause the value of rupee to fall. The price of petrol will then increase by Rs 10 to Rs 12 rupees per litre. The cost of diesel may increase by up to Rs 10 too.
If the tension between Iran and America ends in a few days, there will be no increase in the prices of petrol and diesel, of course. Otherwise, people may have to pay more for petrol and diesel for the next two or three months. After this, the situation can turn normal. That is because when there is a decrease in the supply of crude oil, the US, Russia and other oil-exporting countries will increase their supplies.
Only last year, when the US removed the oil import concessions from Iran to eight countries, including India, oil prices increased for some time, but later the Organisation of Petrol Exporting Countries (OPEC) increased the oil supply. The US increased its supply too. This brought crude oil prices under control in a few days.
Even after the drone attack on two plants of Saudi Aramco, the world’s largest oil company, the supply of crude oil was reduced and the prices went up but in a few days the prices again came under control.
Crude oil production in India has been between 32 and 36 million metric tonnes for the past 20 years. It stood at 32.5 million metric tonnes in 2018-19, which is only 15% of the total consumption need in India. The consumption of petroleum products in 2018-19 was 213 million metric tonnes.
India imports 85% of its petroleum products requirement. India imported 226.49 million metric tonnes of crude oil and 33.34 million metric tonnes of petroleum products directly in 2018-19. That is, a total of 259.84 million metric tonnes of petroleum was imported.
Price of petrol, diesel fluctuating since 1980
During the Islamic Revolution in 1980, Iranian students captured the US Embassy in Tehran and held 50 American diplomats and civilians hostage. Since then, the US started imposing various sanctions on Iran. That the US considers Iran to be a sympathiser of international terrorism makes the situation worse.
The United Nations banned Iran four times between 2006 and 2010 as Tehran refused to cooperate with the International Atomic Energy Agency (IAEA) to get its uranium enrichment facilities examined. Subsequently, in June 2012, the US and the EU banned Iran to exert pressure on it to stop its nuclear programme. Iran’s oil exports declined following this ban.
The Iran nuclear deal was signed in 2015. Apart from Iran, the agreement included the US, Russia, China, Britain, France and Germany. At the time this agreement was reached, Barack Obama was the US president. These countries involved in the deal lifted restrictions on Iran’s oil, trade and banking sectors while, in return, Iran agreed to limit its nuclear activities. Iran is one of the largest oil exporters in the world and the removal of these sanctions boosted Iran’s economy.
However, in May 2018, US President Donald Trump called the deal ‘worthless’ and distanced the US from it. Trump then imposed a series of sanctions on Iran. The US imposed sanctions on Iran so that it could be forced into a new agreement, which did not work. Also, all countries of the world were asked not to import any goods from Iran. Since then, the conflict between the two countries has only worsened, affecting petrol and diesel prices internationally time and again.