Ukraine Invasion: The Surge In Crude Oil Price Could Hit Indian And Global Energy Demand

Amid tensions between Russia and Ukraine, oil prices have been climbing, and today, Brent crude prices jumped 7.3 percent and surpassed $100 per barrel touching $103.9 a barrel for the first time since September 2014. This comes after Russian President Vladimir Putin authorized a 'Special military action' in the Donbass region of Ukraine.

Many analysts predict that prices will continue to climb sharply, owing to concerns about a big interruption in the global energy supply. A group of JPMorgan Chase & Co. economists forecasts last month, January that a rise to $150 per barrel would cut global economic growth by more than three-quarters, to less than 1% in the first half of the year.

Energy costs have already been rising in recent months due to a slew of variables, including the pandemic, restricted supply, and rising Russian-Ukraine tensions.

Even as crude prices surpass $100 per barrel, India, the world's third-largest oil consumer, anticipates consumption of petroleum fuels to reach new highs next year.

Rising crude oil prices are seen as a big problem for India Inc., as any increase in raw material and energy prices might put more pressure on domestic firms' margins in the future. Higher crude oil costs, according to market analysts, are a big headwind for a number of industries, including aviation, tyres, paint, and oil marketing organizations.

Oil prices soared today, whereas stock markets around the world plummeted. While oil has risen more than 40% to $101.2 (10.10 am IST) from December 1, 2021, when it was selling at $70.4, the BSE's benchmark Sensex has fallen more than 1,750 points to 55,504 (at 10.10 am IST), with a day's low of 55,148. The Rupee also dropped 40 paise or 0.5 Percent to 75.1 per US dollar.

High inflation is a major issue despite India's robust growth, which is putting pressure on the company's earnings margins. If crude oil prices continue to rise, the mood may suffer in the short run.