International oil prices are heading higher with Brent crude oil futures trading at about $70 a barrel.
What is the present trend?
Oil had been selling at below $45 in June.
It’s now selling at $70/barrel, making it a 55% rise in a matter of just months.
This is also a four-year high and a price increase of close to 6% since the start of 2018.
Early rise in prices were attributed to the supply decisions taken by oil producers like the OPEC members, which have suffered due to U.S. shale producers.
However the present rise seems more to be the result of a weakening of the U.S. dollar.
Why has the dollar weakened?
The dollar has been gradually weakening against major global currencies since the beginning of last year.
This was given a further downward push, when U.S. Treasury Secretary commented in favour of a weak-dollar policy.
At WEF meet he noted that a weaker dollar would be good for American trade.
How should India deal with this?
Consumers in India are already beginning to feel the pinch as petrol and diesel prices have hit multi-year highs.
However, the government should go back to its earlier policies of providing subsidies to ease the pain.
It should rather rationalise taxes on petrol and diesel to bring down retail prices.
This will help consumers without imposing an undue burden on the oil marketing companies.
Higher oil prices might also give hard time to government’s fiscal management.
So the government should think for the long term of making India self-reliant.
It should fasten its hydrocarbon exploration and licensing policy (HELP) to expedite oil discovery and production.
Simultaneously, it must also actively support Indian energy firms’ bids for overseas oilfields.
