No supply disruption, but price a concern for India

International oil prices surged to over a seven-year high of $103 a barrel on Thursday after Russia attacked Ukraine, but supply lines to India remain unaffected, a top government official said exuding confidence of uninterrupted fuel supplies even if the conflict escalated.

For consumers, the spike in global oil prices will not have any direct bearing just yet as state-owned fuel retailers continue to hold petrol, diesel and LPG rates.

“Supply lines are all open. None of them has been impacted (by the Russian aggression). There are abundant supplies available in the market,” the official, who wished not to be identified, said. “Our suppliers are in the Middle East, Africa and North America, who are untouched by the conflict and they continue to supply oil and gas as normal. That situation is likely to continue even if the present conflict escalated.” Prices, however, are of concern as they will stoke inflation. “Retail prices are on hold but ultimately they will have to be increased at some point,” the official said.

Brent crude rose to as much as $103.78 a barrel, the highest since August 14, 2014, and was at $103.40 at 1500 hrs, up $6.71, or 6.93 per cent. India, the world’s third-largest oil consumer, depends on imports to meet 85 per cent of its needs. The imported oil is converted into products like petrol, diesel and LPG. Saudi Arabia, Iraq and other Middle East nations account for 63.1 pc of all imports. Africa is the second biggest supplier, accounting for close to 14 per cent of all supplies while North America gives 13.2 per cent. Russia makes up for a third of Europe’s natural gas and about 10 per cent of global oil production. About a third of Russian gas supplies to Europe usually travel through pipelines crossing Ukraine.

But for India, Russian supplies account for a very small percentage. While India imported 43,400 barrels per day of oil from Russia in 2021 (about 1 pc of overall its imports), coal imports from Russia at 1.8 million tonnes in 2021 made up for 1.3 per cent of all coal imports. India also buys 2.5 MT of LNG a year from Gazprom of Russia.

While supplies at the moment seem to be of little worry for India, it is the prices that are a cause of concern.

Domestic fuel prices - which are directly linked to international oil prices - have not been revised for a record 113 days in a row.