Ukraine war: Rally in edible oils, wheat and gold

Sharp hike in fuel prices expected, even as rupee falls

The war in Ukraine has driven the prices of many commodities northwards, even as the rupee has weakened to a historic low, adding to the pressure in the economy. 

Most of the sunflower oil supplies to the country was coming from Ukraine, while the domestic production accounts for less than a quarter of the demand. With Ukraine being war-hit, the supplies have completely stopped. “What we are selling now is the imported stocks already here before the war; there is no new shipments coming. Sunflower oil price has seen a hike of nearly 40% and is expected to only further go up, as stocks in the country sell out,” said Shailesh Ladhad, a leading oil merchant in the city. As sunflower oil supplies dwindle, consumers are invariably moving to groundnut and palm oils, driving up their prices as well. 

The price of wheat is also increasing as the war has disrupted the global supply chain of wheat and India has taken to fill the gap. Russia and Ukraine were big exporters of wheat to Europe. While supply chains from Ukraine are disrupted due to the conflict, economic sanctions on Russia have also added to it. “Indian farmers have produced enough wheat that where today because of the war, wheat is not available, we are able to move some quantities,” said union finance minister Nirmala Sitharaman, who addressed a BJP event on “Atma Nirbhar Economy” in the city on Tuesday.

Ramesh Chandra Lahoti, a senior food grain merchant in the city, said the export of wheat had already begun showing in the domestic market, driving prices northwards, by nearly 25%. 

After the Union and State governments slashed fuel prices by cutting taxes on November 4, 2021 when the crude oil price was $80/Barrel, the fuel price has remained unchanged for over four months now, which many attribute to the recently concluded poll season. However, that is all set to change hinted Ms. Sitharaman on Tuesday. “We are heavily dependent on imports for our fuel needs, actually more than 85%. The oil companies will take a call on the fuel price soon,” she said. 

There has been a rally in the crude oil prices and the Brent crude oil was trading at $126.73 on Tuesday, after it jumped to $139 days ago. The situation is further worsened as the rupee has fallen to its record low at ₹ 76.97 against US Dollar on Tuesday, down from ₹74.64 on February 20. 

Expecting a rally in fuel prices motorists have already taken to get their fuel tanks full. “We have seen an uptick of about 25-30% footfalls at petrol bunks in the state. Many who are coming in are opting to fill full tanks,” said Sanaulla Anees K. A, Vice President, Karnataka State Federation of Petroleum Dealers. The Federation expects a rally of at least ₹8, spread out over a few weeks.