Petrol and diesel are likely to get more expensive as the cost of crude oil hits a seven-year high

• Crude oil prices have risen to their highest level at a 7-year high as markets fear a full-blown war between Russia and US over Ukraine.
• This is likely to lead to a hike in petrol and diesel prices, by retailers like BPCL, IOC and HPCL after Feb 14, the last voting day this election season.
• Check out the latest news and updates on Business Insider.

Petrol and diesel prices are already at near record levels in India and it’s likely to get worse. The cost of crude oil has hit its highest in seven years as markets fear a full-blown war between Russia and US over Ukraine.

Crude oil prices have gone up 25% since the start of 2022 but fuel prices have not moved in tandem. The price of petrol and diesel have largely remained the same through this period because fuel price hikes may have shown poorly on the ruling Bharatiya Janata Party (BJP) that’s facing elections in five states currently.

While retailers like Bharat Petroleum, Indian Oil and Hindustan Petroleum are free to set their own prices, they are owned by the government and their decisions continue to reflect the political motives of their bosses.

So, all the price hikes that didn’t happen in the last few weeks are likely to hit the consumer with a vengeance after February 14, the last voting day this election season. To make matters worse, the cost of crude oil is likely to stay high due to the fear of a conflict in Ukraine. .

Rising fuel prices could make the biting inflation in India worse. A rise in inflation is typically tackled with a hike in interest rates by the Reserve Bank of India and equity markets don’t like that.

So far, the Indian central bank has been quite unfazed about the high inflation in India. Arguable, a little too chill. However, the fresh spurt in import bills may force Governor Shaktikanta Das to hike interest rates.

A rise in interest rates leads to higher cost of borrowing for companies and lesser trading money in the markets. Further, this will also increase the transportation bills, and cost of other key inputs, squeezing profits. For consumer product makers, it’s bad news because people’s spending will also be hit.

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