Stories
Why Crude Oil Crossed 110 Dollars Despite Russian Supply?
- •Despite the US exempting Russian oil from tariffs, Brent crude prices recently crossed 110 dollars per barrel due to various global market pressures.
- •Ukrainian drone attacks have severely damaged several Russian oil refineries, delaying the actual supply of refined products to the international market.
- •Attacks on Saudi Arabia's East-West pipeline and the ongoing threats in the Strait of Hormuz have significantly disrupted global shipping routes and raised transport costs.
- •Global emergency oil reserves have dropped drastically, leading to high risk premiums as buyers hoard oil out of fear of future shortages.
- •Higher international crude prices increase pressure on the Indian rupee and import costs, potentially impacting the common man if the crisis persists.
Key Questions Answered
Crude oil prices crossed $110 because Ukrainian drone attacks severely damaged Russian refineries, preventing immediate market supply, alongside supply disruptions and attacks in Saudi Arabia and the Strait of Hormuz.
Attacks and security threats on ships in the Strait of Hormuz have caused traffic to drop from 20 million barrels per day to 8.5 million barrels per day. Consequently, shipowners take longer routes, increasing freight charges and insurance premiums that add to global oil prices.
Since India imports 80 to 85 percent of its crude oil, expensive oil increases import expenses and puts downward pressure on the Indian rupee. However, petrol and diesel prices at the pump do not immediately rise unless the crisis persists for a long time, as governments may absorb costs or adjust taxes.
