India faces a higher oil import bill as Brent crude nears $100 and the Indian crude basket crosses $106 amid West Asia supply risks. Rising crude costs could pressure inflation, fuel margins, the trade balance and the rupee.
India is facing the prospect of a higher crude oil import bill and renewed inflationary pressure as international oil prices approach $100 a barrel amid escalating tensions in West Asia and concerns over disruptions to energy supplies. Brent crude futures rose more than 2% to around $99 a barrel, while US West Texas Intermediate gained nearly 3% to about $94 on September 8.
The increase comes as attacks on Saudi energy infrastructure and heightened tensions involving Iran and the US raise concerns over the movement of crude through key regional shipping routes. The Strait of Hormuz, which normally handles about one-fifth of global oil and liquefied natural gas supplies, has experienced a sharp slowdown in traffic. West Asian oil shipments have fallen to around 11 million barrels per day from approximately 18 million barrels per day during the conflict.
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India is particularly vulnerable to sustained crude-price increases because it imports more than 88% of its crude oil requirements. Higher international prices increase the dollar-denominated import bill, potentially widening pressure on the trade balance and the rupee. The impact can also extend to domestic inflation through fuel, transportation and other energy-intensive sectors.
The Indian crude basket has already crossed the $100-per-barrel threshold. According to Petroleum Planning and Analysis Cell data, the basket averaged $82.04 per barrel in July, increased to $90.19 in August and reached a September average of $100.75. On September 7, it stood at $106.26, representing an increase of nearly 30% from the July average.
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The surge is also putting pressure on oil marketing companies, including Indian Oil Corporation, Bharat Petroleum Corporation and Hindustan Petroleum Corporation. With domestic petrol and diesel prices remaining unchanged for several months, higher crude costs could compress marketing margins and increase under-recoveries on fuels and LPG.
India’s crude import bill had already increased by more than 56% year-on-year during April-July to $63.4 billion, despite import volumes remaining broadly stable. Analysts have cautioned that a prolonged period of elevated crude prices would pose greater risks to inflation, the current account and currency stability than a short-term price spike.