New Delhi, February 28 (IANS). Global oil prices are likely to rise after the ‘major military operation’ launched by America and Israel on Iran. This conflict could bring the Strait of Hormuz into the war zone, which could hinder the export of crude oil from Middle East countries.
More than 20 percent of the world’s oil supply is routed through the Strait of Hormuz, which connects the Persian Gulf to the Gulf of Oman and the Arabian Sea. Oil supplies from the region could be affected after heavy missile attacks and Donald Trump citing the destruction of Iran’s navy as a key objective of the military campaign.
Analysts believe that geopolitical tensions have increased following the large-scale coordinated attack by the US and Israel and retaliation by Tehran. In such a situation, oil prices may increase further due to ‘war premium’.
By the close of trading on Friday, oil prices closed 2 percent higher and Brent crude reached $ 72.48 per barrel. This increase was due to increasing tension between America and Iran and fears of supply disruption.
Barclays Bank has said that if there is a major disruption in supply, the price of Brent crude could go up to $ 80 per barrel. However, the bank also said that the increase in tension does not mean that the supply will stop immediately, but the risk premium has been added in the market.
Meanwhile, a senior official said India has strengthened its energy security in the last few years by increasing oil imports from countries outside the Gulf. Oil no longer comes through the Strait of Hormuz in large quantities.
He said that the country’s oil marketing companies (Indian Oil, Bharat Petroleum and Hindustan Petroleum) have reserves of several weeks and supplies are continuing through various routes.
India imports about 85 percent of its crude oil needs. Rising oil prices increase import bills and increase inflation, which harms economic growth.
However, India has diversified its oil sources by increasing imports from regions such as the US and Africa and strengthened its position by building strategic crude oil reserves. India has 2.25 million metric tonnes (MMT) of crude oil storage capacity at Pudur, 1.33 MMT at Visakhapatnam and 1.5 MMT at Mangalore. In addition, another strategic storage facility is being constructed at Chandikhol located on the sea coast.
In case of emergency, the country can use these strategic oil reserves. When global prices rise too much, national oil companies can still be bailed out by resorting to these reserves.
–IANS
DBP/
