Fri. Mar 29th, 2024

Increasing tensions between Russia and Ukraine might affect the global market. Turned out to be true, when on 27th January we saw a sudden surge in oil prices, with Brent breaching the $90-per-barrel mark. Some experts predict oil prices might reach $100-110 per barrel, if the situation worsens.

Might affect the global markets

Russia’s economy is highly dependent on selling oil and gas overseas. Sales are a huge source of revenue. But the geopolitical situation in the Middle East and now the Russian-Ukrainian conflict imply the possibility of supply disruptions.

Since, Ukraine moves Russian crude oil to Slovakia, Hungary, and the Czech Republic, therefore, the increasing rift could hamper this process of transportation.

Since the beginning of the year, even when COVID-19 cases were increasing across the globe, demand for crude oil didn’t go down. As a result, prices have risen sharply. It is interesting to note, that the prominent oil suppliers have kept increasing supplies, despite rising demand.

As Croft, the RBC strategist mentions, “Russia can weaponize energy – to make everyone feel pain.”

How can it effect India?

Soaring prices simply lead to inflation in the country. Moreover, it will affect the forth coming budget as it will increase the amount of subsidy on LPG and kerosene, which the government is required to pay.

Furthermore, the upcoming assembly elections and rising inflation will eventually push the government to review taxes on oil and related products. This could be a positive sign, since oil prices and related products have been rising for the last two years.

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