Recently the US administration imposed various sanctions on PDVSA which is the state oil company of Venezuela. To put the throughout pressure on the country’s President Nicolas Maduro who is a Socialist and to control the crude oil exports to the US, President Donald Trump led government had come up with these sanctions.
Now here comes the news that due to various sanctions that the Venezuelan Oil Trade is facing, India could see the rise of oil prices in its domestic market and face the other trade deficit issues. The CARE ratings report that due to these sanctions India could feel the difference in its trade deficit. Due to this the exchange rate and the oil prices are expected to go up.
After Iraq, Saudi Arabia and Iran, the South American country is the fourth biggest exporter of crude oil to the Indian subcontinent. It supplies almost 12% of total oil exports to India. As of now, India meets its oil requirements of huge 80% through such imports. Therefore, even the slightest increase will impact the country’s economy.
The CARE reports explained that depending upon how much the oil industry needs, the rise in crude oil prices would decide the price increase. It could also impact fiscal breakeven oil prices which is important for the government when it frames the budget. If the oil price increases, India could face the economic burden amounting to approximately $1.6 billion.
During December last year the OPEC and its counterparts had announced to cut down the oil production. Due to this, the oil prices had started becoming stable. Crude oil production entered the bear market during December last year. The prices had started prevailing since October 2018 and faced a sharp decline since then. The fall was mainly due to the US relaxing its various sanctions on Iran temporarily. It can also be attributed to the fact that the world had been facing a slow economy due to the ongoing trade war between China and the US.