News Column

Oil prices soar amid fears of US strike on Iraq

June 15, 2014

BRENT crude oil hit a ninemonth high near $ 115 (` 6,862) a barrel on Friday over fears that oil exports would be hit after the United States threatened military action against Islamist militants in restive Iraq.

India imports around 80 per cent of its crude oil requirement and any increase in international prices is expected to bring the country's oil companies under financial stress.

As petrol prices in the country are market- linked, any increase in international oil prices is likely to be passed on to consumers already reeling under inflation.

Diesel prices have also been partially freed and would end up higher.

This in turn would impart a cost- push effect to inflation as transport costs go up on account of raised truck charges. Shares of oil marketing companies Indian Oil, Hindustan Petroleum and Bharat Petroleum on Friday tanked as much as 8.2 per cent following the surge in crude prices.

Higher crude oil prices would increase under- recoveries of oil marketing companies that sell at subsidised rates.

The government's subsidy bill would also go up leading to a weakening of the fundamentals of the economy.

According to a Reuters report, the jihadists in Iraq extended their advance to towns only about an hour's drive from Baghdad, while trucks carrying Shiite volunteers in uniform rumbled towards the front lines to defend the city, stoking concerns of prolonged unrest.

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Source: Mail Today (India)

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