The surging of crude oil continues to take place in the global market. Every day, we see that the boiling crude oil is touching the new record level. It has also breached the level of the United State Dollar (USD) 127/barrel. Also, the recent earthquake in China has increased the demand of crude oil and Chinese companies such as the “Petro China” are purchasing crude oil in huge quantities. This has further hiked the price of crude oil in the world market. If this situation continues to remain for few more months then in that case, a time will come where we may see crude oil touching a level of $200 per barrel in a year.

Indian oil companies feel that prices of crude oil will further rise to a new level. Hence, they are purchasing dollars. Now, this attitude has led to an increased demand of the US dollars in India and every day the dollar is strengthening against rupee forcing rupee to a new low level record.

The price of crude oil is increasing every day. Also, we can simultaneously see the rupee to be weakening every day. This situation is like a double edge sword which is hanging on India. India is importing costly oil and also there is an increase seen in the payment burden of oil imports. In the start of late 2006 or early 2007, India was comfortable with INR/USD rate of over Rs.45/USD. Crude oil at that time was around USD 50-60/barrel. However, the present situation is different. I must say that it has gone worst, now.

The crude oil prices have almost been doubled and rupee is slowly reaching to a level where it was in the late 2006. The crude oil has to certainly fall, otherwise, it will cripple the economy of India.