How Will Rising Fuel Affect Your Budget and Investments?

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Crude oil rates are rising internationally. In 2018 alone, it was up by 14 percent. Brent crude, the benchmark for international oil prices was at $78 per barrel today, while petrol per litre crossed Rs 75 in Delhi.

Constraints in oil supply globally and robust demand, geopolitical tensions around Iran, along with the strengthening US dollar have pushed the rates higher. Whether or not you pay attention, these changes will affect your livelihood and assets, besides the Indian economy.

How Will Rising Fuel Affect Your Budget and Investments?

How does it affect India?

As we know, India is highly dependant on imported petroleum. With higher import costs, our current deficit (when imports are higher than exports) is at its worst in the last five years. The rupee is falling, touching 68 against the dollar yesterday.

Our country is becoming highly vulnerable to oil prices and rising US interest rates.

How will it affect your budget?

Transportation is a big element in the expenses of most sectors. Vehicles run on fuel and when fuel prices increase, rupee falls, inflation goes up. It's a vicious circle.

On Monday, the government reported that the CPI (Consumer Price Index) for the month of April had accelerated to 4.58 percent from 4.28 percent, which means the food you eat has already started becomes expensive. To make up for the rising costs, you will have to make bigger adjustments to your monthly budget. You may have to give up your vacation plans.

Apart from the grocery items, consumer products that are made from imported elements (cars, mobile phones, medicines) will cost also more. Prices of crude oil-based products used for household consumptions (soap and detergents) will also be affected.

How will it affect your investments?

When the rupee falls, equity markets fall and your investments in stocks or mutual funds may too. Withdrawal of foreign investment in markets will hurt the currency further. Apart from equity, inflation will hit your deposits and loan EMIs. Earnings on your bank accounts will not match the inflation rate.

Gold, a favourite among Indian investors will depreciate with rising US dollar valuation. Long-term bonds will, however, rise.

Read more about: investment petrol diesel rupee
Story first published: Wednesday, May 16, 2018, 21:10 [IST]
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