Global oil prices: India watching Israel-Palestine conflict closely, says Puri

India is watching the ongoing conflict between Israel and Palestine carefully, Union oil minister Hardeep Singh Puri says today. He also says that India will deal with the current situation with "maturity".

"India will handle it with maturity. As far as the energy sector is concerned, the place where the action is taking place is in many respects the centre of global energy. We will watch very carefully," the Union minister tells the media in New Delhi.

He says that such kinds of uncertainties and events only encourage people to look for alternate sustainable ways, and adds that crude oil prices at $100 per barrel is not sustainable.

Puri last week had also urged global oil producers’ group OPEC (Organisation of the Petroleum Exporting Countries) to bring "affordability" in the oil markets while raising concerns about its crude oil production cuts and their impact on the global energy sector.

Notably, India is the largest importer of crude oil, which makes it vulnerable to global crude oil fluctuations. Amid the unprecedented clashes between Israel and the Palestinian Islamist group Hamas, oil prices have surged over $3 a barrel today. The price of crude oil jumped around 17% to over $97/bbl in September, from an average of $78/bbl in the first quarter of FY24.

The current crisis in the Gulf could directly hurt state-run oil marketing companies(OMCs) in the country that have been forced to keep the retail fuel prices unchanged ahead of the General Elections in 2024.

Vinod Nair, head of research at Geojit Financial Services, says an unforeseen escalation in the Middle East has rekindled pessimism in global markets. "Moreover, the rapid surge in oil prices presents a significant threat to the global market, which is already dealing with elevated inflation and interest rates. In the mid-and small-cap segments, we observe consolidation as investors reshuffle their portfolios due to premium valuations in this space." 

Ratings agency Moody’s also says high crude oil prices will weaken the profitability of the three government-owned oil marketing companies in India -- Indian Oil Corporation Ltd, Bharat Petroleum Corporation Ltd, and Hindustan Petroleum Corporation Ltd, adding that these companies will have limited flexibility to pass on higher raw material costs by increasing the retail selling prices of petrol and diesel in the current fiscal year ending on March 31, 2024. 

The minister, meanwhile, at the 26th Energy Technology Meet, says India's target of achieving net zero emissions by the year 2070 is "a little too long-term" and that the country is moving fast towards energy transmission, especially in the wake of uncertainty in the global energy sector.

He says the energy transition in India will initially be from fossil fuels to cleaner fuels, and then to renewable energy resources. He also says that India provides many opportunities for investment in oil & gas. "With transformative policies, government initiatives, technological advancements in the energy sector, India provides a plethora of opportunities for investment for domestic and international players envisaging investment opportunities of around $250 billion in oil & gas sector by 2030," says the minister.