- Goldman Sachs expects Brent crude oil prices to drop to $80 per barrel by year-end
- Current Middle East conflict has pushed oil prices up to $119 per barrel
- Indian government is currently sharing increased oil costs with oil marketing companies
Amid the ongoing tensions in the Middle East that have pushed Brent prices up, Goldman Sachs has estimated oil prices will drop to $80 per barrel toward the end of this year.
Expecting the Middle East conflict to end in a couple of weeks, Goldman Sachs Chief India Economist Santanu Sengupta told NDTV Profit that Brent crude oil (Brent) prices are expected to retreat toward $80 per barrel by the end of this year. The prices of both oil and natural gas have spiked to $119 a barrel amid the ongoing conflict in the Middle East as ongoing attacks in the Persian Gulf threaten long-term damage to major energy facilities.
The surge in energy prices in the last few years has been typically shared between entities such as the government, oil marketing companies and consumers. Based on the duration and magnitude of the price shock, the government decides whether to pass on the cost to the customers. In the case of the ongoing Middle East war, the government has taken the view not to pass on anything to the consumer. The cost is currently being split between the government and OMCs.
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Will Consumers Face The Heat?
According to Sengupta, the government's current stance will totally depend on oil prices. If oil price hike sustains for a longer period, the cost will likely be passed on to the consumers, typically over the next quarter. In case the Middle East crisis resolves quickly and oil touches $80-$85 per barrel, consumers are unlikely to face a price hike.
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When Will RBI Hike Interest Rates?
Sengupta expects a pause in key interest rates in the upcoming Reserve Bank of India's (RBI) monetary policy meeting, while these rates are expected to be tightened by the end of the year. He expects liquidity in the system to be adequate, and has estimated a rate hike of 50 basis points in the latter half of the year.
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