- Terror crisis in Iraq has pushed Brent crude prices to $113 a barrel, raising fears of huge losses and increased under-recoveries for oil marketing companies (OMCs) and airlines.
- Even those who do not import crude oil from Iraq will be affected by the surging crude oil prices.
- Indian OMCs dreams of achieving market price of diesel after the govt gave them a nod to increase diesel price by 50 paise every month may not be realised in this context.
- Moreover, Indian OMCs bear the brunt of every surge in the global oil prices and depreciation of the rupee.
- Novel fuel price reforms which balance a gradual unwinding of subsidies with economic growth are the only ones that can change this.
- India is scheduled to buy 290,000 barrels per day of Iraq’s Basra Light crude. Disruption in oil supplies will increase the cost to its refiners resulting in further increase in global crude prices.
- Even an increase in few dollars will adversely affect the airline industry, which is already reeling under losses. Airlines have no ability to pass on the hikes as that will affect demand.
- Some analysts believe that international intervention could solve the crisis.
- Read at: http://www.thehindu.com/todays-paper/tp-business/iraqi-conflict-causes-*concern-among-oil-firms-airlines/article6121359.ece
Exams Perspective:
- What is Brent crude prices?
- Oil Marketing Companies (OMCs)
- India Iraq Economic Relations
- Sectarian Violence in Iraq