Global Crude Prices Won’t Reduce Your Petrol, Diesel Bills Anytime Soon. Here’s Why.
Ira Singh
9 Oct’23
In a world where the global crude oil prices seem to be in a perpetual state of flux, consumers often hope for a silver lining in the form of reduced petrol and diesel prices at the pump. However, despite the recent dip in crude oil rates, it’s important to temper these expectations as this is unlikely to have any significant drop in fuel prices in the near future.
Despite a consistent fall in global crude prices, which went through the roof after the start of the Russia- Ukraine war last year, common consumers will have to wait for a drop in petrol and diesel prices in India. Though margins on petrol and diesel have turned positive for the oil marketing companies following the softening of international oil prices, they would require more time to recover their losses accumulated due to high crude prices last year, according to information.
As far as a revision in oil retail prices is concerned, it may happen only after state-owned oil firms recoup losses they incurred last year, PTI reported, quoting officials.
State-owned Indian Oil Corporation (IOC), Bharat Petroleum Corporation Ltd (BPCL) and Hindustan Petroleum Corporation Ltd (HPCL) have temporarily abandoned the daily price revision since last year and have not revised petrol and diesel prices in line with the cost. And the losses they incurred when the oil prices were higher than the retail selling prices are now being recouped with rates dropping,as per media reports.Officials said the three firms have been making positive margins on petrol since the fourth quarter of the 2022 calendar year, but diesel, which accounts for the bulk of the fuel sales, had been in red.
International oil prices had spiked to USD 139 per barrel in March 2022 in the aftermath of the Russia-Ukraine war. They have since cooled to USD 75-76, stated report.At peak, oil firms lost Rs 17.4 per litre on petrol and Rs 27.7 a litre on diesel. In the October-December quarter, oil firms earned Rs 10 a litre margin on petrol but lost Rs 6.5 on diesel. In the following quarter, the margins on petrol moderated to Rs 6.8 a litre while diesel earned Rs 0.5 per litre, according to information.
International oil prices have been turbulent in the last couple of years. It dipped into the negative zone at the start of the pandemic in 2020 and swung wildly in 2022 climbing to a 14-year high of nearly USD 140 per barrel in March 2022 after Russia invaded Ukraine, before sliding on weaker demand from top importer China and worries of an economic contraction, according to sources.But for a nation that is 85 per cent dependent on imports, the spike meant adding to already firming inflation and derailing the economic recovery from the pandemic.
So, the three fuel retailers, who control roughly 90 per cent of the market, froze petrol and diesel prices for the longest duration in at least two decades. They stopped daily price revision in early November 2021 when rates across the country hit an all-time high, prompting the government to roll back a part of the excise duty hike it had effected during the pandemic to take advantage of low oil prices.
The freeze continued into 2022 but the war-led spike in international oil prices prompted a Rs 10 a litre hike in petrol and diesel prices from mid-March before another round of excise duty cut rolled back all of the Rs 13 a litre and Rs 16 per litre increase in taxes on petrol and diesel effected during the pandemic, according to information.
That followed the current price freeze that began on April 6, which still continues.
Moreover,the Global Biofuel Alliance (GBA), launched on 9 September on the sidelines of the G20 Summit in New Delhi, seeks to increase the use of sustainable biofuels and is being projected as a long term solution to rising requirements.While falling global crude oil prices might seem like a cause for optimism,but again the concern,’why cheap crude oil won’t reduce your petrol diesel expenses in a nation which is the world’s third-biggest oil importer’,still remains an enduring challenge.