Impact of oil prices on your money

THE MECHANISM

Ifyouownacaror bike, you may have noticed a steep hike in monthly fuel bills. The reason is the rise in global crude oil prices, which have gone up due to multiple reasons. Iran exports declined after President Donald Trump pulled the US out of the 2015 accord, making oil prices expensive. Indian currency rupee has depreciated to an all-time low of 71. When crude oil prices rise globally, it has a negative impact on the country’s import bill as India imports a huge proportion of its oil requirement and pays most of it in dollar, said Gaurang Somaiyaa, currency analyst at Motilal Oswal Financial Services Ltd.

YOUR MONEY

“Increase in crude oil prices will have a broad-based impact, majorly on domestic fuel, the petrol and diesel you fill in your vehicles,” said Suresh Sadagopan, founder at Ladder7 Finanical Advisories. Petrol prices in India are determined by market movements. Hence, “when international crude oil prices rise, it will have a direct negative impact on domestic prices,” he said. As a consumer, besides cost of global oil price, taxes are also added to the overall cost, making petrol and diesel more expensive for you. It also has a direct impact on goods you get as transportation cost of vegetables and other things get costly.

AN INDIRECT IMPACT

Expensive petrol prices are the direct impact that one faces from a rally in crude oil prices and a weak rupee; but an indirect impact is that it makes imports expensive. If the rupee weakens, India will be paying more to buy products from other countries, which will ultimately reflect in the price you pay for imported goods. “Goods like imported mobile phones or foreign cloth brands will become more costly than before,” said Sadagopan. Any product that you buy which has any imported input in it will weigh more on your wallet, he said. Depreciating rupee also makes overseas travel and foreign education more costly.

IS IT TAXABLE?

Tax is levied on the difference between market value and value at which the employee purchased it according to tax slab. When shares are sold, it is considered capital gains and is taxed at 15% if sold in a year. If the ESOP is of a company based outside India, when the shares are sold it will be considered short-term capital gains and will be added to income of the employee. Losses can be carried forward in your tax

return.