Fuel prices across the country remained unchanged for the third day on Wednesday amid the crash in global oil markets and crude slipping to $28 per barrel. The price of petrol in the national capital currently stands at Rs 69.75 per litre while diesel is priced at Rs 62.44 per litre. The price freeze followed an 18-day declining streak in retail rates on the back of a slump in global crude and commodity prices. Automobile fuel prices have followed a downward trajectory since the start of the year, falling 7-8 per cent since 1 January 2020.
Rate – for initiation of 2020
Fuel prices this month have been the lowest since January 2019 but the decline has not been able to stimulate demand as Coronavirus outbreak starts restricting public movement in India. Domestic demand for petrol, diesel, Aviation Turbine Fuel and shipping fuel has contracted 10 per cent in the first fortnight of March, the first such decline in several years. Oil prices rebounded slightly in Asian trade on Wednesday, with Brent crude trading at around $29 per barrel in early trade. While domestic fuel prices are not directly linked to global prices of crude oil, petrol and diesel prices typically trail global oil prices. Oil marketing companies fix the price of petrol and diesel at retail outlets based on a rolling average of the past 15 days of the benchmark prices of petrol and diesel in West Asia. The fall in global oil and commodity prices has also resulted in a drop in the prices of Liquefied Petroleum Gas, Aviation Turbine Fuel and auto LPG prices in India.
While this should have immediately brought down retail prices of petrel and diesel as well, an Indian Oil Corporation official said that family revision of petroleum product prices in India is based on 15 days trailing average price of products based on indices. So consumers will have to wait and hope that softening of oil prices continues or is maintained for next 10 days so that deeper cuts in petrol and diesel could be effected. If it does, a sharper Rs 5-6 per litre cut in price of petrol and diesel could be expected sometime next week.
Petrol is being retailed at Rs 70.29 a litre and diesel Rs 63.01 per litre in Delhi on Wednesday. What is interesting that product prices in India also follow movement of Indian basket of crude, whose price remained relatively high at $45 a barrel on Tuesday. Its movement would also have to be tracked before a larger benefit to consumers may accrue, said an oil sector analyst. He added that 4 per cent drop in rupee value against dollar this week also has negated much of the gain of fall in oil prices as companies will now have to pay more to buy dollar and import oil. Also, the possibility of government using the lower oil price to raise excise duty on petrol and diesel to boost its coffers is also there though official sources said that it could result in inflationary pressure and come as an other shock in the midst of a slowdown. If state and and central government do not get tempted to raise duties on petroleum products, consumers could get a better deal in the last leg of the current financial year.
Petrol, diesel prices in the four metropolitan cities:
Delhi: Petrol – Rs 73.59; Diesel – Rs 66.81
Mumbai: Petrol – Rs 79.20; Diesel – Rs 70.03
Kolkata: Petrol – Rs 76.23; Diesel – Rs 69.17
Chennai: Petrol – Rs 76.43; Diesel – Rs 70.57
The continuous spike in fuel prices in India was propelled by the drone attack on Saudi oil facilities that disabled around 5 per cent of the global supply. Not only fuel prices in India were impacted as the aftermath, but retailers were also scouring the market for liquefied petroleum gas (LPG) ahead of the festive season. India depends on Saudi Arabia for a fifth of its oil imports and buys around 2,00,000 tonnes of LPG every month. While the price of petrol and diesel is impacted by the global crude price and the value of rupee, the Saudi Arabia drone attack compounded the increase in prices.
Turning point in rate
Oil prices slipped for a third consecutive session on Wednesday as the prospect of the United States and China striking a trade deal in talks this week dimmed, raising uncertainties for global economic growth and oil demand, reported Reuters. US industry data showing a bigger-than-expected rise in stockpiles at the world’s top oil producer also depressed prices: Brent crude futures fell 27 cents, or 0.5%, to $57.97 a barrel by 0148 GMT, while US West Texas Intermediate crude CLc1 was at $52.38, down 25 cents or 0.5%, reported the agency.
Experts say in the immediate term there is expected to be a massive reduction in demand of fuel as everything has come to a stand-still except for movement of essential commodities. Anish De, National Head-Energy & Natural Resources, KPMG in India explained that going forward a lot will depend on how the impact of Covid-19 plays out in India and gloabally.