While oil exporting nations are benefiting from higher oil prices, oil importers face growing crude import bills that affect government finances.
India—the world’s third-largest oil importer—is one of the biggest losers of the higher oil prices in recent months, as the increased price of oil widens its trade deficit, puts more upside pressure on inflation that threatens to exceed government targets, and risks reducing current projections for robust economic growth. All this is happening while Indian politicians and consumers (voters) face a series of elections this year and next, with a general election expected to be held in the spring of 2019.
In March 2018, India paid a nearly 14-percent higher crude oil import bill than in March 2017. The value in U.S. dollars of India’s oil imports—accounting for more than 80 percent of its oil consumption—in the fiscal year April 2017-March 2018 rose by 25.47 percent compared to the previous fiscal year, government trade data shows.
In early April, India’s Oil Minister Dharmendra Pradhan told Bloomberg that oil prices at $70 a barrel are ‘too high’ for India’s economy, which is a very price-sensitive market.
“I’d be more than happy if the prices are around $50 plus,” the minister said, adding that if the Saudis were targeting $80 a barrel oil price, it would “pinch India in a big way.”
While international crude oil prices hit three-and-a-half year highs in April, gasoline prices in Delhi surged to their highest in four years, and diesel prices hit an all-time high.
Last week, Minister Pradhan expressed concern about the high fuel prices, adding that the government needs to keep a balance between the interest of consumers and of India’s fiscal situation amid the higher price of oil.