Skyrocketing Oil Prices

Crude oil as we know is a raw natural resource which is later used for supplying energy to power industry, heat homes and provide fuel for vehicles and airplanes making it the world’s most important commodity. Crude oil was first discovered and developed during the Industrial Revolution and since then there is always demand for oil around the world. The prices of fossil fuel such as crude oil has immense impact on the world economy. Countries with enough oil reserves generate revenue by exporting oil to the economies dependent on oil imports. Global prices of commodities and fuel have surged to unexpected level in the past few weeks. U.S., Saudi Arabia, Russia, Canada and China are world's top five Oil producers in current times. And any sort of political unrest which would affect oil production and supply in these countries will cause a direct effect in the supply and demand of crude oil like any other industry.

Russian Supply Shortage. From the past few months, the price of oil has been soaring high continuously. Rising oil price is also an indication of inflation in an economy, which now we are currently witnessing around the world. Oil prices have hit decades high in March 2022 due to Russian invasion in Ukraine following the U.S. imposing complete ban on Russian oil, gas and coal import. As said earlier, Russia being the 3rd largest oil producers, imposing sanctions on Russian oil creates shortage of oil supply unable to meet the oil demands around the world. Russian exports five million barrels of crude oil each day, more than half of which is exported to Europe. Russia is the main supplier of crude oil, natural gas and other solid fossil fuels in the EU. The stability of the EU’s energy supply is threatened due to the Russia-Ukraine war. This leads to the speculation for the shortage of oil supply around the world, thus causing the price of the oil to shoot up.

Oil Market. There are two major oil contracts watched carefully by the oil investors and traders all over the world. West Texas intermediate (WTI) which trades on New York Mercantile Exchange (NYMEX) and North Sea Brent Crude which trades on Intercontinental Exchange (ICE). Oil being a Global commodity, is the most commonly traded as it is extremely volatile in nature. Investors and traders prefer oil because it can be a speculative asset, a portfolio diversifier or a hedge.

India buys Russian Oil.

India Oil Corp. bought 3 million barrels of crude oil from Russia to fulfill its energy needs despite the sanctions imposed by the U.S., Britain and the West as India hasn’t imposed any ban. India imports 85% of the oil it consumes and Russia was offering discount oil purchase of 20% below the global benchmark prices. So, it does seem like a good deal India could get for Oil purchases from Russia.