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Lok Sabha elections ransom India from the effects of rising oil prices
The Narendra Modi government is being criticized as the oil prices in India were increasing by leaps and bounds almost daily in the last few months.
Many opposition parties had even made it a poll issue in several state elections.
This was the second time that the Modi government had just barely dodged an oil crisis after coming to power in 2014. After a period of constant upsurge, the global crude prices finally stabilized in the last few months of 2018. Instability in the international oil market has made an unforeseen rebound at the time of the country-wide Lok Sabha elections 2019, much to the displeasure of the government.
The US President Donald Trump has lifted waivers granted earlier to eight countries on importing oil from Iran, including India. Owing to supply cuts from the Organization of the Petroleum Exporting Countries (OPEC) and existing US sanctions on Venezuela, crude oil prices have been rising globally, leaving India in further distress. As a result of the fresh US order, India will not be able to import oil from Iran from May 2nd, 2019. According to analysts observing oil market trends, international crude prices will jump to 80-85 dollar/barrel in short-term after Trump's recent decision. The order could significantly disrupt importing needs of non-oil producing countries, added experts.
Henceforth, India will be forced to rely on other nations such as Saudi Arabia, Kuwait, UAE, and Mexico to satisfy its oil requirements.
At the same time, a rise in global crude oil prices will also lead to an increase in demand for the US dollar, thus damaging the Indian currency on the rupee-dollar exchange. India's domestic equity market could also be remarkably affected. Analysts are undoubted that America's pronouncement to end India's Iran oil waiver will inevitably cause higher fuel prices, despite US' efforts to stabilize the oil market. Officials from oil marketing companies (OMCs) have confirmed that petrol and diesel will become high-priced after elections.
Given the daily oil price revision system followed in India, rates ought to have inflated or at least matched the rise in global crude prices. However, no such increase has been observed in India over the last few weeks.
It is thought that the election season has bailed the country out, as it has in the past, but that may only last until the end of the Lok Sabha elections.
After the elections, OMCs will turn to customers to reimburse the losses.
Several oil PSU executives have suggested that there will be no upsetting in domestic oil supply but added that consumers may experience the trouble due to higher prices after the Lok Sabha elections.
