Oil prices jumped three dollars a barrel on Tuesday.
The new price puts an annualised burden of Rs 27,000 crore on Indian energy firms because of escalating hostility between Russia and Ukraine through which Russian gas is piped to Europe.
Russia controls one of the biggest reserves of oil and gas in the world.
For Indian oil companies, high oil prices can be a crippling burden at a time when the government is reluctant to raise fuel prices sharply in the run up to elections.
Such companies depend heavily on imports.
Each one dollar increase in crude oil price heaps the oil sector with a burden of Rs 9,000 crore a year.
Brent crude, the main benchmark for global prices, climbed to this year’s peak of 112.10 dollars per barrel.
Meanwhile, the U.S. benchmark, WTI, rose to nearly 105 dollars after Russian President Vladimir Putin declared he had the right to invade Ukraine.
Analysts said U.S crude oil might touch 120 dollars if the situation went out of control.
Russia has ignored Western pressure and mobilised forces after its parliament authorised putin to use its military might to protect Russian citizens in Ukraine.
Some analysts say this may be biggest standoff between Moscow and Washington since the days of the cold war.
The biggest worry is for Europe, which counts of Russian gas piped via Ukraine for about 25 per cent of its natural gas demand.
Some analysts said Russian supplies are not likely to be affected by a war and prices are likely to retreat after rising slightly.
But others say crude oil could shoot up if there is a war.
“Oil markets are reacting on the potential that the situation could worsen,” Ben Le Brun, market analyst at OptionsXpress mentioned in media report.
“But I suspect oil will move much higher, if it actually comes to war. US crude could easily surpass 110 dollars and a 120 dollars target is not out of the question,”.
Reuters/NAN
