Double whammy for oil bill

Falling rupee doesn’t augur well for oil prices.

Coming at a time when global crude prices are rising, they are set to pinch more as a falling currency would amplify the oil bill in rupee terms.

As per Anoop Bhatia, VP & sector head at rating agency Icra, considering that the oil prices remain around $75-80/barrel, the net oil import bill for India may increase by 50% (YoY) to around $100 billion in fiscal 2019. The rise in oil prices and import bill could lead to weakening of the Indian Rupee against US$.

India pays in dollars for buying international crude and would have to pay more in rupee terms.

The rupee has fallen nearly 7% so far during the past six months even as dependence on oil imports has exposed the country’s economy to risks of higher crude prices.

“The oil price is also rising because because the US is pressurising other countries to stop purchasing oil from Iran,” said another analyst.

Oil imports from Iran surged to about 705,000 barrels per day in May, highest since last October, according to industry data, despite the threats of fresh US sanctions against Tehran.

While India is the second-largest crude customer for Iran after China, the Persian Gulf nation is the third-largest source of crude oil for India.