In India, the imports of crude oil is nearly three-fourth of its requirement. So it is crystal clear that any small increase in the world crude oil price will have great impact on domestic economy. The changes in the world crude oil price have increased the inflation rate in the economy and as a result, it has affected the stock markets also. The article tries to shed light on some of the reasons for such an increase and its implication on Indian economy and domestic sector.

Oil prices in the international markets have of late been rising relentlessly sending shock waves across the world. The prices of Brent and WTIthe leading benchmark types of physical crude oil crossed the $30 per barrel mark in the early 2004. From then oil prices increased continuously and almost reached $50 per barrel, settling at slightly lower levels during the third week of August (See Chart 1). The world economy is heated up over this issue and analysts predict that there is very little scope for oil prices to reverse their direction immediately.