Israel-Palestine War: Will Petrol-Diesel Prices Go Up? Here's What Hardeep Singh Puri Says

The ongoing conflict between Israel and Hamas has raised concerns about its potential impact on natural gas, crude oil, petrol, and diesel prices, especially amid the economic repercussions of the Ukraine conflict.

Union Minister for Petroleum and Natural Gas, Hardeep Singh Puri, on speculations of crude oil price changes amid the Israel-Palestine conflict said, "...It stands to reason that if the crude oil prices go up, that has a very strong & adverse impact on the attempts at global economic recovery....I think the global markets will factor all things into account and if the supply lines are not disrupted, hopefully, we will able to navigate through everything. But this is not something on which I would like to speculate...What we are doing is that we are watching it on a real-time basis and I am confident that India will navigate this both on availability and other factors."

With oil prices already volatile since September, experts have also warned that a further surge could occur if the conflict escalates beyond Gaza. However, with the elections season looming, analysts including Moody's have said that petrol and diesel prices are likely to remain unchanged as they have been since September 2022 even though crude oil prices may be surging.

HEAR IT FROM THE EXPERTS:

Prabal Sen, a Research Analyst at ICICI Securities, cautions that if other countries become involved in the conflict, such as Lebanon and Egypt, global oil prices could skyrocket to $95-100 per barrel, causing significant problems."If other countries start getting involved, like Lebanon and Egypt, then global oil prices could shoot up to $95-100 per barrel and that is when it really starts getting problematic," said Sen as quoted by Moneycontrol.

The deployment of US warships to assist Israel and reports suggesting that Iran has supported Hamas have heightened fears of the conflict spreading to other nations in the region.

However, there is hope that the conflict between Hamas and Israel will remain localized, according to Mayank Jha, a senior economist at HDFC Bank, especially considering the upcoming election year, where the government may absorb the impact of oil price surges.

The Moneycontrol report quoted Jha saying, "Until now the government and OMCs (Oil Marketing Companies) have been absorbing the surge in prices, if it remains between $85-95 per barrel it is fine. And this is an election year, so the government will have to balance and absorb (the hit),"

Oil prices had already been hovering above $90 per barrel for several months, raising concerns about tight supply due to cuts by major oil-producing nations like Saudi Arabia and Russia.

India, as the world's third-largest consumer of crude oil, is particularly susceptible to oil price fluctuations. The surge in prices could impact India's import bill, affecting various sectors, including food, transportation, and logistics.

Former Indian ambassador KC Singh points out that Saudi Arabia and Russia, two countries capable of increasing oil production to limit price rises, may not be inclined to do so.

Singh was quoted saying, "Russia is in no mood to help because their strategic interest converges with Iran and indirectly with that of Hamas. If there is trouble in Israel, the US is distracted and will have less time and energy for the Ukraine conflict especially when there is already fatigue in Europe over the war,"

IS INDIA SHOCKPROOF?

The global economy is currently grappling with the Russia-Ukraine conflict, which has destabilized global economic stability. The Israel-Gaza conflict adds further uncertainty to the global economic recovery. If more parties join the conflict, it could have a significant impact on global growth, prices, and trade.

India is not entirely immune to the impact of these wars. While it's not heavily dependent on many nations for oil, the ripple effect of localized conflicts could influence global crude oil prices, leading to consequences for local inflation and the current account deficit.

However, experts believe India has certain buffers to limit spillover effects from the conflict. If the conflict remains contained, the impact on India's macroeconomic fundamentals should be minimal. Major oil fields are located farther from conflict zones, and India's dependence on Iranian oil has substantially reduced. While India may face oil price fluctuations in the medium term, its stronger macroeconomic fundamentals should help absorb any fallout from the conflict more effectively than many other countries.

Ultimately, the key is to ensure that the conflict remains localized and does not draw more nations into the fray, which could lead to a more severe economic impact.