The 14-day ceasefire amid geopolitical tension in the Gulf countries has given some breathing space to the global market. Taking advantage of this ‘ceasefire window’, the Indian government is continuously putting pressure on Iran to immediately speed up the movement of crude oil and gas ships coming towards Indian shores. The government’s business strategy is very clear, this peace period should be used to rapidly replenish the country’s fuel stock, so that the economy can be saved from further shocks that may disrupt the supply of crude oil.
It will take time for oil trade to regain its old pace
Experts in the shipping world believe that even though the ceasefire has come into effect, it will take at least three months for the oil trade to regain its old pace. At present, 16 Indian-flagged commercial ships are stranded in the Persian Gulf. The only thing of relief is that in the last few weeks, eight LPG carriers have somehow succeeded in crossing the Strait of Hormuz.
The seriousness of the situation can be understood from the fact that at present about 800 ships are stuck in the entire Gulf. Clearing this huge backlog is no less than a logistical nightmare due to the extremely slow speed of ships, their limited availability, loading problems and the strictness of insurance companies. Indian refinery companies want the supply from the Gulf to be restored soon, but the ground reality shows that this recovery is going to be very slow.
Iran will collect tax from ships passing through Hormuz
The biggest obstacle from a trade point of view is Iran’s current stance. Amid ongoing ceasefire talks with the US, Iran has proposed imposing a new tax (levy) on ships passing through the Strait of Hormuz. A top official associated with the shipping industry clearly says that until a concrete final agreement is reached, Iran will not allow the traffic to normalize.
On the other hand, India has made its stand absolutely clear on this issue. Foreign Ministry spokesperson Randhir Jaiswal has said that there has been no discussion with Iran on the issue of this levy. India expects unhindered global trade and navigation through the Strait of Hormuz as per international rules. Another official also clarified that the right to unhindered movement in international waters is protected by United Nations rules, so America’s stance in this matter does not matter much.
Will the prices of petrol and diesel reduce?
Will the prices of petrol and diesel reduce due to this ceasefire? According to commodity market experts, the answer is currently ‘no’. Even though Brent crude futures fell by $19 on Wednesday to $91 per barrel, the real picture is of the spot market. In the last one month, Indian refineries have paid a huge price of 130 to 140 dollars per barrel for crude oil in the spot market.
Moreover, even if some ships make it out of the Gulf safely, sending them back there is a huge commercial risk. The fear of ships getting stuck again and the problem of not getting new insurance cover is increasing the freight cost of companies. In such a situation, until the physical supply of crude oil in the international market becomes completely normal, it would be too early to expect any major relief in the fuel prices in the domestic market.
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