Brent crude crosses $100 a barrel, raising fears of costlier petrol, diesel and freight
Brent crude rose to about $101-102 a barrel on Wednesday amid West Asia tensions and threats to oil shipping routes, raising fears of higher fuel prices and inflation.
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The global oil market is seeing major turbulence once again. Brent crude has risen above $100 a barrel in the international market. On Wednesday it reached about $101 to $102.
Several factors are behind the growing worries over crude supply. Tension is rising in the Middle East, oil shipping routes are under threat, and a storm has been forecast in the US Gulf region. Costlier oil is likely to hit petrol and diesel prices directly, then freight costs and, finally, inflation.
The impact of the Middle East conflict is clearly visible in the oil market. The Houthis of Yemen are carrying out attacks on Saudi Arabia, and concern has also arisen over the safety of ships in the Gulf region. These factors have increased pressure on the oil supply chain.
Meanwhile, the conflict between Iran and the US has kept key sea routes, including the Strait of Hormuz, clouded by uncertainty. Investors fear that the movement of oil through this region could be disrupted.
The effect of rising crude prices is not limited to petrol and diesel. When fuel costs rise for trucks, buses, ships and aircraft, freight becomes costlier. This can also put pressure on prices of foodgrain, industrial goods and everyday items.
The diesel market is particularly tight at present. Diesel prices in Europe are reported to have risen 13 per cent in a single day. This has created a fresh challenge for countries trying to bring down inflation.
To keep rising oil prices in check, the International Energy Agency (IEA) and European countries have begun talks on releasing emergency oil and diesel stocks into the market. The G7 countries have also decided to make available about 100 million barrels of oil and fuel from their stocks.
However, this step may bring only some relief for now. If the real supply problems persist, oil prices could climb again. The Middle East conflict and the state of oil shipping routes will therefore prove decisive for the world economy in the coming period.
