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`Crude prices hinge on US course of action'

Our Bureau

NEW DELHI, Sept. 19

THE global oil price shock will begin to tell on the country's import bill only after a fortnight's period since India purchases crude on a tender basis which is priced on the average for the month around the date of purchase.

A back of the envelope estimate indicates that a dollar rise in crude price raises the annual oil bill by Rs 3,200 crore. This assumes a dollar-rupee exchange rate of Rs 50 per dollar and an even consumption pattern through the year. Besides, the barrel- tonne conversion is taken at eight barrels to a tonne. (Since India buys a basket of crude having varying densities, the precise average density presently works out to 7.45 barrels to a tonne).

Officials point out that the American action over the next few days will decide the behavior of world crude prices. If the Americans decide to attack Afghanistan, then aviation turbine fuel prices will rise having only marginal impact on the other petro- products.

One point of view in Government circles is that in case they choose to turn offensive on countries like Libya and Nigeria, it might not entirely destabilise crude prices as these countries are not `swing' producers which have spare capacity to move marke ts. For example, the past continual pounding of Iraq has not destabilised the crude prices over a period of time.

The rise of $1 in crude prices will translate into an increase of Rs 1,500 crore in the oil pool deficit on an annual basis.