The timing for US President Joe Biden who’s facing a very close election fight couldn’t be worse. The Russia-Ukraine war shows no sign of ending. In Israel, it’s looking like Prime Minister Benjamin Netanyahu wants to keep fighting the Gaza war forever. Huge crowds turned out in Tel Aviv Monday calling on Netanyahu to quit. Netanyahu knows an end to his governing coalition and his judicial reckoning will come when the fighting against Hamas stops.

Even Israelis now are saying Netanyahu may want to drag on the war as long as possible to avoid his day in court. Bombing the Iranian embassy in Damascus was a reckless, virtually unprecedented act. The world’s holding its breath and waiting for the inevitable Iranian retaliation.

In anticipation, the global benchmark Brent crude price has surged above $91, up from $84 before Hamas attacked Israel last October and the below $80-level where prices stabilised following Russia’s Ukraine invasion.

Analysts say it’s more than likely crude prices will head toward $100 for the first time in nearly two years, especially if Iran chooses to launch a major strike-back which would restrict Iran’s oil flow and potentially other regional producers. OPEC production cuts, big Mexican crude export curbs and Houthi rebel attacks on tankers in the Red Sea are also pinching supplies.’

Prime Minister Narendra Modi will probably be lucky because his electorate will not be feeling the impact of rising oil prices when they cast their votes. But gasoline prices in the US have been drifting upward this year — they’re now $3.60 per gallon, up from $3.20 in January.

For Biden, it will be bad news if oil prices soar to the sensitive touchy $4-mark or even $5 a gallon as some analysts forecast may happen with the US summer driving season looming. Voters have a habit of punishing presidents on whose watch gas prices rise. Biden can dip into the US oil stockpile, already at 40-year lows. But that could lead to charges of oil reserve mismanagement.

Russia oil

Biden has one solution that might immediately send oil prices southward. India’s faced criticism for buying Russian oil but it’s always been clear that if India stopped buying, it would result in an instant negative shock to global supplies and prices. Easing up on sanctions and allowing Russian oil exports to flow more freely would have a rapid positive supply impact.

But the US has been doing the exact opposite in the last few months. It’s been tightening the screws. The US Treasury Department’s Office of Foreign Assets Control (OFAC) is squeezing Russia’s ‘Dark Fleet’ that’s been ferrying oil to different corners of the world.

The result is 40 vessels, or 15 per cent of Russia’s shadow fleet is now banned from many ports globally, including India. And in February, OFAC moved against the Russian state-owned shipping giant Sovcomflot. It also added 14 tankers partly owned by Sovcomflot to its banned list. Sovcomflot is thought to form a quarter of Russia’s Dark Fleet. The Russians have, according to analyst Craig Kennedy, spent $8.5 billion to buy ageing, often poorly maintained ships in the global market.

Nevertheless, despite the sanctions and the fact Russian discounts have fallen steeply, India’s still lapping up Russian crude. In 2023, Russia emerged as India’s top oil supplier and we purchased $37 billion worth of Russian crude, up from virtually zilch before the Ukraine conflict.

Buying of Russian crude is “by no means the exclusive behaviour of a select few. All of India’s commercial-scale refineries with access to coastal ports are buying,” says Viktor Katona, lead crude analyst, at Kpler, a global trade intelligence consultancy. Reliance got in the game first on a large-scale but IndianOil has now overtaken it.

India is a difficult market for Russia to serve: it requires a larger number of ships to bring crude all the way here. But India now is an even more valued Russian customer than before because due to sanctions other countries like South Korea have stopped buying Russian crude. Only the Chinese continue as the biggest buyer globally. It’s “unlikely India will fall below the 1.5 million/mbd pace of Russian purchases over the course of 2024,” Katona says.

All in all, though, the world needs to brace for higher oil prices. And say goodbye to rate cut hopes. With the US – and Indian – economies growing more vigorously than expected and inflation sticky here and abroad, caution will be the driving force for central bankers amid fears that a sustained oil cost uptick will fuel prices.