Fuel prices could have reduced by Rs 1 but for OMCs' reluctance
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New Delhi, July 27 The reluctance of oil marketing companies to make a downward revision of fuel prices in line with softening of global oil and product prices over past fortnight has prevented consumers from getting at least Rs 1 per litre relief on prevailing retail prices on petrol and diesel.
In line with softening of global oil prices, OMCs have not revised petrol and diesel prices for the past 10 days since July 18. But with the way petroleum products and crude prices have moved over last fortnight, the OMCs could have effected price cuts on fuel prices.
In the block of the last 30 days, benchmark Brent crude has remained on an average over $74 a barrel in a fortnight while the average has fallen to about $72 a barrel in the immediately preceding fortnight. The price movement has been similar for Indian basket of crude that is benchmark used by Indian oil companies and global prices of products.
As per oil industry experts, every $1 change in crude normally affects retail price of petrol and diesel roughly by 45-50 paise a litre with no major change in rupee-dollar exchange rate. If this calculation is applied, retail price of petrol and diesel should have started falling from this week in India with OMCs requiring to bring down rates by over Rs 1 per litre in few days or at one go.
Under daily price revision, OMCs revise petrol and diesel prices every morning benchmarking retail fuel prices to a 15-day rolling average of global refined products' prices and dollar exchange rate.
"The previous fortnight provided opportunity to OMCs to cut retail fuel rates. However, they have chosen to wait and watch as crude is still swinging on daily basis rising and falling consistently. Things would get clearer when more crude starts entering the market from next month by OPEC countries. This could soften oil prices if there is no big pickup in demand and US inventory levels remains stable," said an oil sector expert not willing to be named.
There have been occasions in past one month, when OMCs could have provided relief to consumers by cutting fuel pump prices. But, this has never been applied so far and OMCs seem to be satisfied by keeping petrol, diesel prices unchanged. And at the first instance of market indications, fuel prices have been increased. Only on July 12, OMCs reduced price of diesel by 15-17 paise per litre but even on that occasion petrol prices rose by up to 35 paise per litre.
The 10 day long price pause for retail rate of petrol and diesel has come after fuel prices increased on 41 days and remained unchanged on 47 days since May 1. The 41 increases have taken the petrol prices up by Rs 11.44 per litre in Delhi. Similarly, diesel has increased by Rs 9.14 per litre in the national capital.
Since April 2020, petrol prices have increased by Rs 32.25 per litre from Rs 69.59 a litre to Rs 101.84 a litre now in Delhi. Similarly, diesel prices during the period have increased by Rs 27.58 per litre from Rs 62.29 to Rs 89.87 a litre in the national capital.
(Subhash Narayan can be contacted at [email protected])
