India should try to keep petrol and diesel prices steady even if oil prices rise because of the Iran crisis. If fuel becomes expensive, many other things also become costly, and that can create bigger problems for the economy

In 2008, when Iran tested a powerful missile, oil prices quickly shot up to $147 per barrel — the highest ever. Right now, oil is around $80, which is not too high compared to recent years. If the current conflict ends in a few weeks, as US President Donald Trump has said it might, then oil prices may not rise too much.

India is in a fairly safe position for now. Oil companies have saved a lot of money in the past few years because they kept petrol prices high even when global oil prices fell. Inflation — which means the general rise in prices — has also been low. In February, it was just 2.75%, which is below the Reserve Bank of India (RBI)’s comfort level of 4%. India also buys oil from many different countries and has enough fuel stored for more than two months. The government may even ask companies to focus on India’s needs instead of exporting fuel during the crisis.

Still, we must be ready if oil prices rise sharply again. Oil is very important for the economy. It does not just power cars and buses — it also affects transport costs and the making of many goods, like milk packets, food wrappers, and clothes made from synthetic materials. If oil becomes expensive, many products become expensive too. This can increase inflation and slow down economic growth.

At the start of this year, experts thought oil prices might fall to $50 because there was plenty of supply. The Economic Survey said there was no big risk of inflation from oil. But studies show that if oil prices rise by 10%, inflation in India could go up slightly. When prices rise, people have less money to spend on other things, which slows down the economy.

That is why the Government of India and oil companies should try hard to avoid suddenly increasing fuel prices. Oil companies can manage this for a few months if needed. Once the war ends, oil prices may fall again, and companies can recover any losses.

In the United States, petrol prices change freely. On Monday, petrol was about $3 per gallon and could rise further. That could worry Donald Trump, who had earlier promised cheaper fuel. Since elections are coming up in the US, he may want the conflict to end quickly to avoid higher fuel prices.

No matter what happens, India should be prepared for any situation.

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