Crude oil prices likely to remain high for longer, says ADB economist

ADB Chief Economist Albert Park said crude oil prices are likely to remain elevated due to the prolonged Middle East crisis. He warned that higher oil prices could reduce India’s GDP growth, raise inflation and affect food prices through rising fertiliser and gas costs

New Delhi: Crude oil prices are likely to stay higher for longer due to the disruption caused by the longer-than-expected Middle East crisis, ADB Chief Economist Albert Park has said.

“With a higher oil price expectation, we actually have it at USD 96 per barrel on average for 2026 as per the new reference scenario. It should stay elevated at USD 80 per barrel in 2027. So, our view is that oil prices are likely to stay higher for longer,” Park told PTI in an interview.

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Future prices are showing higher levels farther into next year than they did earlier, he said.

However, he said, “We have also always seen a kind of premium in the spot market prices and the nearby futures market because there is such a shortage currently.”

Speaking about the impact of the ongoing Middle East crisis on India, Park said it is going to shave off 0.6 per cent from the country’s GDP growth, bringing it down to 6.3 per cent, and also stoke inflation significantly in the current financial year.

The Asian Development Bank (ADB) in April projected India’s GDP growth to remain “robust” at 6.9 per cent in the current fiscal and rise to 7.3 per cent in the next fiscal, driven by strong domestic demand.

With regard to inflation, ADB had projected it at 4.5 per cent for the current fiscal.

For India, Park said, “We do find that growth would be lower by 0.6 per cent (FY27). This is based on our model scenario. But it would not negatively affect growth next year. India would kind of bounce back next year.”

Inflation would increase by 2.4 per cent this year to 6.9 per cent, he said.

“So that’s a bit higher than the inflation impact for the region (Asia-Pacific), because India is more reliant on imported oil and gas. The growth effect, if you take out China, this negative 0.6 per cent on growth this year is pretty similar to the region as a whole as well,” he said.

ADB, on April 29, in its special update, lowered the Asia-Pacific growth projection for 2026 to 4.7 per cent from 5.1 per cent earlier, weighed down by prolonged West Asia disruptions.

Asked about El Nino’s impact on food production, Park said, “Of course, it’s very uncertain. Obviously, whenever there’s a bad harvest in India, we have an issue with higher prices. India accounts for a huge part of the global trade in rice. So, whatever happens in India often also has a big impact on other countries.”

That is a reason for concern apart from rising fertiliser prices, he added.

With the cost of fertiliser going up, farmers will use less fertiliser, which will reduce yields and availability later in the year, he said.

It will definitely have a bearing on food prices, but how much would depend on the gas disruption, he added.