The recent fall in crude oil prices is due to recessionary fears and the prices might come down further if western economies continue to pass through adverse circumstances, minister for petroleum, natural gas and urban development Hardeep Singh Puri said on Thursday.
He added that crude price at $120/barrel was anyway unsustainable for the world economies, as the resultant inflation tends to cause recession.
Brent futures fell below $100 a barrel for the first time since April 25 on Wednesday, on fears of a potential global recession. At 6 pm (IST) on Thursday, it was trading at around $101.53 per barrel.
Lower oil prices would mean a lower import bill for India, which imports around 85% of its annual need. It would also ease pressure on the country’s current account deficit and have a salutary effect on the fisc, as prices of many major commodities including natural gas and subsidised goods like fertilisers are linked to oil.
The fall in the Brent price will have a significant impact on India and other importing nations, including a reduction in overall inflationary pressure on these economies, said Crisil’s director – energy Saurav Mitra.
After hitting the decadal high of $121.28 per barrel on June 10, the Indian basket of crude oil fell to $103.71 per barrel on July 6. The Indian basket of crude oil represents a derived basket consisting of sour grade and sweet grade of crude oil processed in Indian refineries.
The average daily price of the Indian basket of crude oil in April was $102.97; it rose to 109.51 in May and further to $116.01 in June. So far in July, the average price is $109.44 per barrel.
On the latest hike in the price of LPG for cooking, the minister said: “You can’t have discussion on gas price in isolation. You have to discuss along with other energy products.” The minister said India is one of those countries where fuel is not available, still the prices of fuel and gas have been maintained at relatively low levels.