New Delhi: The global oil price is at historic lows which is good news for the Indian economy as it relies mostly on imported oil to meet its needs. Unfortunately, this low price is a result of the pandemic that has more or less shut down the global economy leading to a massive decrease in demand for oil. The low demand also triggered a fracture in the oil cartel that has routinely manipulated its production to sustain a price that they prefer.
Global oil demand and oil cartel machinations are not particularly susceptible to Indian influence as India is neither a major producer nor consumer of oil. On the contrary, the Indian economy is extremely susceptible to the global oil price and has always been uncomfortable with its predicament. Electrification of transportation with the electricity being generated from locally sourced fuels is the only plausible way for India to minimize its dependence on oil imports.
From a macroeconomic perspective, freight transportation is relevant to India’s chronic concerns about inflation. The majority of freight is transported by diesel trucks. An increase in global oil price ends up being passed on to the trucking sector that in turn raises the price of goods for all consumers. Electrifying trucks with the electricity sourced from renewables has the potential to reverse inflation dramatically.