India will suffer the economic pain of rising crude prices on account of the Libyan crisis just like other economies around the world, but will not suffer any loss of asset or run short of oil due to supply disruption from that country.

India imports about a million tonne of crude annually from Libya. These are sourced as long-term contracts between the national oil companies of the two countries. It is unlikely that the supply will stop, if at all, for long. Indian refiners can always make up for the shortfall with oil from the spot market, or buy it from term suppliers like Saudi Arabia. For sure, those supplies will be at a higher price.

Libya produces around 1. 8 million barrels a day, which accounts for a little less than 2 per cent of world oil supplies. Saudi Arabia, the biggest supplier in the oil producers' cartel Opec, has already promised to ramp up production to make good any shortfall in supplies. Other Opec members, accounting for 40 per cent of global supplies, are likely to follow suit. So supplies are not an immediate worry.

In so far as assets are concerned, state-run companies had five exploration acreages in the country. ONGC Videsh, the overseas investment arm of ONGC, had three concessions and a consortium of Oil India and IndianOil Corporation had two blocks. But here too the companies had given up on the blocks. "We have practically surrendered two of our blocks since we did not think they were prospective enough. We have acquired data for the third and are analysing these, which is an offsite job. Since we don't have any producing property, the unrest there does not affect us, " ONGC Videsh MD Ranbir Singh Butola says, adding that since these are exploration blocks, there weren't too many Indian employees. "Since data acquisition was over, we had only one person from the country in Tripoli. He is safe. "

But Butola expressed concern over the long-term impact on oil fields. The Libyan oil industry is dominated by Western companies. These firms are evacuating their technical employees from the fields, which lie in remote desert areas. The evacuations are reported to have reduced Libyan output by a quarter. It all boils down to price, then. Any permanent loss of capacity in the long term will keep up the pricing pot boiling. Already, London ICE Brent crude has climbed to twoyear highs of $111/barrel. Futures in the benchmark WTI (West Texas Intermediary) too topped $100 on the New York Mercantile Exchange on Thursday.

That is not good for India, which imports 75 per cent of its oil needs. In 2008-09, the fiscal that saw crude hitting a historic high of $147/barrel on July 16, 2008, state run oilmarketers were given Rs 103, 000 crore to keep pump prices in check. In 2009-10 too, the government gave oilmarketers Rs 26, 000 crore in cash and the oil producers gave discounts of Rs 14, 430 crore to keep a check on prices.

Government data shows the losses of oilmarketers have already shot up to Rs 46, 963 crore in the April-December period of the ongoing fiscal. The government has paid Rs 21, 000 crore as cash subsidy and oil producers Rs 15, 654 crore discount. Still, the oilmarketers are expected to lose Rs 76500-80, 000 crore in the entire fiscal.

The situation could worsen if oil prices do not come down. In fiscal 2009-10, the mix of crude India buys averaged $69. 76/barrel. For the nine-month period to December, the average has already risen to $82. Every dollar rise in crude price pushes up pump price of petrol by about 40 paise and diesel by 30 paise. The present pump price of diesel, which is controlled by the government, corresponds to $75/barrel and the oil companies are losing Rs 10. 74 on each litre. In petrol, which is deregulated, the loss is Rs 2. 50 a litre since the companies have not revised prices for fear of upsetting political masters in a time of high inflation.

With such high losses, there is a limit to how much the government can keep prices artificially low. There is then no escape for consumers.