crude oil
The ongoing Iran-Israel-America tension in the Middle East is now turning into a global economic crisis. Due to disruption in oil supply, inflation has increased all over the world and it is affecting poor countries and common people the most.
According to the latest report of the United Nations Development Program (UNDP), due to this conflict, 32.5 million (about 3.25 crore) people have gone below the poverty line or are on the verge of going below the poverty line.
Global trouble increased due to Hormuz crisis
The Strait of Hormuz, the most important route for oil supply, is currently a center of tension. Here the movement of oil has been affected due to America’s blockade and Iran’s retaliatory action and its direct effect was that the global oil supply decreased. Shipping and insurance costs increased. In UNDP’s 27-page report, this crisis has been described as Triple Shock. Due to this, the prices of crude oil increased from $70 to $90-120 per barrel. Food prices are increasing due to fertilizers becoming 15-20% expensive, due to which the risk of hunger has increased in poor countries. Along with this, inflation is increasing and economic growth is slowing down.
What is the impact on India?
India is the third largest oil importer in the world. About 55% of crude oil comes from the Middle East, with the Strait of Hormuz being a key route:
-Remittances of Indians working in Gulf affected (38% remittances come from Gulf) -Danger of increase in price of everything due to cost of transport -Farming and food inflation affected due to cost of fertilizer. According to sources, every 10 dollar increase in the price of oil can increase India’s inflation by 0.2-0.25%.
Who is most affected?
-Poor countries of Africa and Asia -Small island nations -Countries dependent on energy imports
According to the UN, 45 million additional people could be at risk of starvation due to the fertilizer crisis.
impact on supply chain
-Hundreds of oil tankers stuck on the way -Shipping insurance expensive -Global supply chain affected -Even everyday things are becoming expensive due to this.
UNDP says that with the help of about 6 billion dollars, 32 million people can be prevented from falling into poverty. Cash transfer and energy subsidies are necessary but this is not easy because many developing countries already have huge debt. Unless the tension in the Strait of Hormuz is reduced and oil supply is normalized, this crisis is likely to continue. This war is no longer limited to the Middle East only, but has turned into a global economic crisis and the poor and common people are paying the biggest price for it.
