Expert Zone

Straight from the Specialists

How falling crude prices affect India

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(Any opinions expressed here are those of the author and not necessarily those of Thomson Reuters)

Brent crude prices have dropped below $100 a barrel, causing anxiety within the Organization of the Petroleum Exporting Countries (OPEC) and giving some relief to India and China. The market is bearish at present but the future is unpredictable.

A gas pump is seen hanging from the ceiling at a petrol station in Seoul June 27, 2011. REUTERS/Jo Yong-Hak/Files The fall in prices is largely due to subdued demand by consumers and oversupply by some OPEC producers. An added reason is the increase in U.S. production from shale. The next OPEC meeting to review oil supplies is in November but an early decision on quotas cannot be ruled out.

Oil is critical for India. For one, India imports more than two- thirds of its requirement, which constitutes 37 percent of total imports. A one-dollar fall in the price of oil saves the country about 40 billion rupees. That has a three-fold effect spread across the economy.

The enigma of diesel prices

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(The views expressed in this column are the author’s own and do not represent those of Reuters)

Budget considerations make it necessary to raise prices of diesel; political exigencies make that difficult. No wonder Chief Economic Adviser Kaushik Basu was cautious enough to suggest ‘partial decontrol’. But the present is the time to do more than that.

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