India is slowly and steadily recovering from the severe impact of the 2nd COVID wave. However, rising crude oil prices seem to be playing spoilsport. In 2021 crude oil prices increased by 49.6% from $47.62 to $ 71.22 as of 26 July 2021, touching an all-time high of $76.98 in between. At the beginning of July 2021, crude oil prices once again reached a high of $76.25 as compared to $ 69.62 in June 2021; a month-on-month increase of 9.5%.
Crude Oil Prices on the Rise in 2021
India is the third-largest importer of crude oil globally. It imports approximately 84% of its total oil requirements, mainly from Iraq, Saudi Arabia, and United Arab Emirates (U.A.E) among others. Rising crude oil prices have the potential to be detrimental to inflation levels in the country and its current account deficit. As stated by an economist at DBS bank “For every $10 rise in oil prices, the current account deficit widens by roughly 0.4% of India’s gross domestic product (GDP).” However, optimism with regard to stronger exports on account of economic recovery globally is expected to offset the deficit in FY22.