Crude oil is one of the most necessitated commodities in the world and India being the third largest consumer.
The crude oil prices have a significant impact on global economies directly or indirectly and this corona virus pandemic have dented the price significantly.
The lock down due to corona virus pandemic resulted catastrophic for fuel demand.The transportation has almost frozen expect for essential items and this seems unlikely to return to normal anytime soon.Airlines are the major oil consumers, which are grounded. This fall in demand nosedived the oil prices to negative.
How is this beneficial for India ???
- Low crude oil prices can reduce India’s import bill as India imports 80% of its oil consumption.
- It can give government a room to increase fuel taxes, an can offset low direct tax collection.
- Since crude oil affects directly or indirectly all the economies, fall in the crude prices can be beneficial in bringing down energy prices leading to moderating inflation rate.
Does India Benefit?
- India does not benefit from falling global crude oil prices.
- The oil demand in India has collapsed as much as by 70%.
- With hardly left with 1/4 of demand, India already has its tanks full.
- Low crude oil prices does not promise definite benefits because major portion of the prices are made up of government taxes .
- Despite cheaper prices, India is likely to refrain from buying any oil due to fall in demand, full storage. Even if we buy cheap, our weak currency won’t help much.