A downslide in international oil prices on demand concerns due to the resurgence of Covid-19 cases in Europe could prompt domestic fuel retailers to slash petrol and diesel rates as benchmark Brent crude plunged sharply by 6.95% to $78.89 a barrel on Friday from the month’s peak of $84.78 a barrel 10 days ago, two people aware of the development said on Sunday.
Brent has slipped below $80 a barrel, the lowest since October 1, which makes a case for reducing petrol and diesel rates in India, they said requesting anonymity.
“State-run oil companies have made some small gains on automobile fuels, but they preferred to watch the declining trend in global oil markets for some time before passing on the benefit to the consumer, as in the past a fall in fuel rates was quickly followed by a spike,” the first person said. Immediate price reductions would, however, be small, under Re 1 per litre, he added.
Retail prices of petrol and diesel in India, which are linked with daily fluctuations of their international benchmarks, have been frozen since November 4, the day the Union government sharply reduced central levies on petrol and diesel by ₹5 a litre and ₹10, respectively. Petrol price has been stable for the last 18 days at ₹103.97 per litre and diesel at ₹86.67 in Delhi.
“For the first time in many months international oil prices fell due to demand concerns, else producers were keeping oil prices artificially high by restricting supplies, ignoring pleas of major consumers such as the US and India,” the second person said. India is the third largest consumer of crude oil after the US and China.
Experts say state-run oil marketing companies should scrupulously pass on the benefit of falling global oil prices to the consumer as theoretically they revise petrol and diesel rates daily. SC Sharma, former officer on special duty at the erstwhile Planning Commission, said: “Since oil prices have fallen and are likely to fall in future, India’s oil marketing companies are also required to pass on the benefit of reduced oil prices on a day-to-day basis in order to give relief to consumers as also to facilitate high economic growth.”
Recently, India saw an unprecedented spike in automobile fuel rates. One of the reasons for high domestic fuel rates is production curbs by the oil cartel, the Organisation of the Petroleum Exporting Countries (OPEC). After international oil prices plunged below $20 due to global lockdowns to contain the Covid-19 pandemic in April 2020, OPEC and its allies, including Russia (together known as OPEC+) on April 12 last year announced an unprecedented 9.7 million barrel per day cut in oil output.