Industry body, the Associated Chambers of Commerce & Industry of India (ASSOCHAM), cautioning about the rising crude prices has said that with Indian basket of crude oil rising by 11 per cent in rupee terms in the last 8-9 days, volatility in energy prices has re-surfaced as the biggest worry for the Indian industry and the policy makers, it has said that the government needs to put in place a contingency plan to tackle volatility in rates.
The industry body further said the volatility being witnessed in crude oil prices was not a good news for India, which is on the cusp of recovery, along with the macro factors like poor outlook of Monsoon. Adding that upward revision in the pump prices every fortnight by the oil companies - if rupee further weakens and bullish sentiment returns to the energy-would not make good headlines for the economic sentiment.
Assocham, though in its paper has said that while it is early days to press the panic button, caution and a contingent plan should be in order if the situation gets worsened by Monsoon deficiency, going forward. It also said that slowdown in the Chinese economy can still be a good news for the oil prices since subdued growth in China can dampen the crude demand, thus affecting its prices.
According to industry body, while the prices were falling, the biggest producer Saudi Arabia had a game plan in the price war, so to speak. It had an eye on the capex spending in the global oil economy and the supply situation in the US, which won’t be a good news for India. In fact, one of the reasons for Saudi Arabia to increase the production is a belief that it is only through some aggressive pricing of keeping the crude oil prices below $50 per barrel that the competition from shale gas in the US can be checkmated.