Common man suffers high fuel prices even as world oil market slides

New Delhi: The high retail price of petrol and diesel continues to impact the common man even though global market has thrown enough cues for a sharp cut in the price of auto fuels. While the Coronavirus scare and continued flat demand for oil has pushed down the global crude price that has fallen sharply by over 24 per cent to $53 a barrel over last one month, there has been less than proportional decrease in retail price of petrol and diesel with oil companies building a cushion for possible increase in oil prices later this year.

Petrol is being retailed at Rs 72.98 a litre while diesel at Rs 66.04 a litre in Delhi when crude oil price of Indian basket is about $55 a barrel. At this level of crude in September-October 2017 (crude price between $ 54-56 a barrel), petrol was being retailed between Rs 69 and Rs 70 a litre and diesel between Rs 57 and Rs 58 a litre in Delhi. Again on a crude price of $57-59 a barrel in December-January FY19, petrol prices remained close to Rs 71 a litre while diesel at Rs 64 a litre.

And the continuing high price of auto fuels now is despite the government having reduced excise duty on the two petroleum products by Rs 2 a litre and Rs 1.50 a litre in the year 2017 and 2018 respectively after increasing the duty on two products on nine occasions in the past. The duty also moved up last year in Budget by Rs 2 a litre.

“It seems state-owned oil marketing companies are making up for the losses they have incurred in earlier months when there was a momentary spike in prices. This is gross injustice for consumers who have braved historically high levels of auto fuels when global oil prices were rising in late 2018. Ideally, petrol and diesel prices should have been lower by at least Rs 3-5 a litre than current levels,” said a top official of an oil producing company asking not to be named.

Officials of OMCs, however, disagree over higher cuts in retail price of petrol and diesel saying that the current scenario should also be viewed in the context of fall in rupee against dollar that makes oil purchases expensive. But rupee has remained strong in last one month only to fall marginally lately.

In the last one year, rupee has depreciated from about Rs 68 to a dollar to about Rs 71 now. Even if this depreciation is taken into account, experts say the retail price gets impacted by about Rs 1-2 per litre. This still means current petrol and diesel are higher by at least Rs 3 per litre.

Under daily price revision mechanism, OMCs have reduced the price of diesel and petrol by just about Rs 3 per litre from Rs 76.01 a litre and Rs 69.17 a litre respectively to Rs 72.98 and Rs 66.04 a litre now. Interestingly, even this period when global oil prices have dropped consistently, OMC have held back retail price revision on few occasions to make up any earlier losses and build buffer for future when oil prices jump again.

The benchmark Brent oil prices have fallen below $55 a barrel now but analysts expect prices to rise again if the oil cartel OPEC decides to extend production cuts while the unrest in the Middle East continues to disrupt supplies. But in all this, the spread of Coronavirus and impact on demand would weigh heavily on global oil prices.

Oil prices have fallen by over 20 per cent in last one month due to continuing flat demand conditions and the spook Coronavirus has created. But analysts believe that once the current problems get resolved, there could be a rise in crude prices but in may remain range bound around $60-70 a barrel putting lesser pressure on oil importing nations like India which imports more than 80 per cent of its needs.

IANS