Economic Survey 2023 sees silver lining in imports as crude oil prices soften

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The recent softening in the prices of crude oil augurs well for India’s petro imports, said the Economic Survey of India.

“On the imports side, notwithstanding uncertainty surrounding the outlook on global crude oil prices, the recent softening in its prices augurs well for India’s POL (petroleum, oil and lubricants) imports,” said the Economic Survey 2022-23, which was tabled in Parliament by the Finance Minister Nirmala Sitharaman on January 31.

Crude oil prices declined to $78 a barrel as of December 2022, while the retail selling price of petrol and diesel moderated due to a cut in excise duty and Value Added Tax (VAT) by the state governments.

This comes after energy imports by India jumped in the nine months ended December 2022 as domestic demand remained high amid the global energy crisis. Among imported commodities, the highest surge was reported in petroleum, crude and petroleum products, followed by coal, coke and briquette, according to the data released by the commerce and industry ministry on January 16.

In FY22 and FY23, inflation in WPI ‘fuel and power’ was mostly driven by high international crude oil prices, according to the Survey. The Indian basket of crude oil peaked at $116 per barrel because of supply disruption amid rising tension in Eastern Europe and the Middle East in June 2022, it said.

Crude oil prices have been volatile since Russia’s invasion of Ukraine. The price of a barrel of crude oil, which is currently trading below $80, hit a 14-year high of more than $139 in March.

Crude prices have come down in recent months due to deteriorating demand amid global inflation and recession fears. Volatility in the international market, however, continued because the group of oil producing nations or OPEC+ often cut oil supply to support prices.