Oil Price Today (July 22): Crude oil crosses $90, hits 2-month high as US strikes enter 11th day. $120 possible, say experts

The recent surge in global crude oil prices, with Brent crude crossing $92 per barrel and WTI nearing $85 on July 22, 2024, marks a significant escalation in energy market volatility driven by geopolitical instability in the Middle East. This development is not merely a market fluctuation but a critical inflection point with profound implications for India's macroeconomic stability, fiscal planning, and strategic autonomy. The immediate trigger is the ongoing U.S. military strikes in the Middle East, now in their 11th day, which have heightened fears of supply disruptions from a region that accounts for nearly one-third of global oil production and hosts critical chokepoints like the Strait of Hormuz. Historically, such spikes — reminiscent of the 1973 oil crisis, the 1990 Gulf War, and the 2022 post-Ukraine invasion surge — have transmitted rapidly into domestic inflation, widened current account deficits (CAD), and constrained monetary policy space. For India, which imports over 85% of its crude oil requirement, the vulnerability is structural. In FY2023-24, India's crude oil import bill exceeded $130 billion, making it the single largest component of the merchandise trade deficit. A sustained price above $90/bbl could push the CAD beyond 2.5% of GDP, breaching the comfort zone defined by the RBI's medium-term framework. The fiscal impact is equally severe: higher oil prices increase subsidy burdens on LPG and kerosene (though direct petrol/diesel subsidies are minimal post-2014 deregulation), reduce excise revenue elasticity if the government cuts taxes to cushion consumers, and complicate the fiscal consolidation path mandated under the Fiscal Responsibility and Budget Management (FRBM) Act, 2003 (amended 2018). Constitutionally, the Centre's exclusive power over 'taxes on the sale or purchase of petroleum crude' (Entry 92A, Union List, Seventh Schedule) and 'regulation of oilfields' (Entry 53, Union List) places the onus of managing this shock on the Union Government. However, States bear the brunt of inflation-induced social unrest and reduced devolution if the divisible pool shrinks. The Monetary Policy Committee (MPC), under the RBI Act, 1934 (as amended 2016), faces a dilemma: rising global oil prices feed into CPI inflation (weight ~7.5% for fuel group), potentially forcing rate hikes that could dampen growth. Strategically, India's energy security doctrine — articulated in the 2015 'Energy Security: India's Strategic Perspective' and reinforced through diversification to Russian crude (now ~40% of imports post-2022), strategic petroleum reserves (SPR) at Visakhapatnam, Mangalore, and Padur (total 5.33 MMT), and the India-Middle East-Europe Economic Corridor (IMEC) — is being tested. Diplomatic engagement with Gulf partners (UAE, Saudi Arabia, Qatar) under the 'West Asia Quad' (I2U2) framework becomes crucial. If prices breach $120 as warned, India may need coordinated action: SPR release, diplomatic pressure for OPEC+ output hikes, and calibrated fiscal-monetary response. This episode underscores the interdependence of energy geopolitics, macroeconomic management, and constitutional federalism — a nexus that defines India's development trajectory in an uncertain world.