Global oil prices to rise as US, Israel launch massive attack on Iran
New Delhi, Feb 28 (IANS/WISHAVWARTA) Oil prices are expected to rise due to the “massive combat operation” launched by the US and Israel on Iran which brings the Strait of Hormuz into the war zone, leading to a disruption in crude exports from the Middle East countries.
Over 20 per cent of the world’s oil supply is shipped out of the Strait of Hormuz which links the Persian Gulf with the Gulf of Oman and the Arabian Sea. With heavy missile bombardment and US President Donald Trump announcing that an annihilation of Iran’s navy was an important objective of the military operation launched by the US on Saturday, the movement of oil from the region would be disrupted.
Analysts expect oil prices to go up due to a “war premium” that has to be factored in due to the large scale coordinated US and Israel attack on Iran marking a major escalation in the geopolitical conflict with Tehran launching retaliatory strikes in the region.
Oil prices settled 2 per cent higher at the end of trade on Friday, with Brent crude settling at $72.48 per barrel, influenced by escalating tensions between the United States and Iran amid concerns about potential disruptions to oil supplies.
Barclays Bank stated that “Brent crude could rise to around $80 per barrel in the event of any significant supply disruption as the market is experiencing a risk premium due to geopolitical tensions, although any escalation may not necessarily lead to an immediate supply disruption.
Meanwhile, India has strengthened its energy security by diversifying its oil imports to countries outside the Gulf in the past few years and a large volume of supplies do not come through the Strait of Hormuz now, a senior official said.
He pointed out that the country’s oil marketing companies (Indian Oil, Bharat Petroleum and Hindustan Petroleum) have supplies for several weeks and continue to receive energy supplies from several routes.
India imports around 85 per cent of its crude oil requirement and a surge in oil prices leads to an increase in its oil import bill and pushes up the rate of inflation which hurts economic growth.
However, India has diversified its oil sources by increasing imports from other regions including the US and Africa as well as building resilience through strategic crude reserves. India has oil storage capacity at Pudur of 2.25 million metric tonnes (MMT), the Visakhaptnam facility has the capacity to store 1.33 MMT of crude oil while Mangalore has a storage capacity of 1.5 MMT. Besides, another strategic reserve facility is being built at Chandikhol which is also on the sea coast.
The country can fall back on these strategic oil reserves in times of emergency. These reserves can also be dipped into at times when global prices skyrocket to provide a cushion to the national oil companies.
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