Oil import bill may rise $70bn annually

Prabhudas Lilladher report

Crude oil prices have risen sharply due to the ongoing West Asia conflict and are not expected to return to the earlier level of $65 per barrel in the near term, according to a report by brokerage firm Prabhudas Lilladher. The report noted that the increase in prices is likely to persist, keeping India's import bill elevated for the coming months.

"We believe crude prices are unlikely to revert to pre-conflict levels of $65 per barrel," the report said on Wednesday.

India buys around 4.3 million barrels of crude every day, adding up to about $180 billion a year. With prices now much higher, Prabhudas Lilladher estimates India's oil import bill could jump by more than $70 billion a year. "The current spike in crude prices is likely to inflate India's import bill by more than $70 billion per annum," the report said.

About 20% of the world's crude oil moves through the Strait of Hormuz. "The shipping route from the Strait of Hormuz is critical for maintaining oil prices within a comfortable range and this remains a big uncertainty as of now," the report noted on Wednesday. It added that further escalation of hostilities and any impact on Bab Al-Mandeb can further squeeze oil supplies and push prices up.

The brokerage noted that the war has not just hit tankers and routes; several global natural gas and oil refineries have been destroyed. "Several global natural gas and oil refineries have been destroyed and would take quite a bit of time to come back to stream or normalise operation," the report said.