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The global oil market experienced a significant dip, with the price of international crude oil, the raw material for petrol and diesel, plummeting to a three-year low. This drop in prices has sparked speculation about potential reductions in domestic petrol and diesel rates in India. While the price of Brent crude futures fell below USD 70 per barrel, the first instance since December 2021, it subsequently recovered following the impact of Hurricane Francine on crude supply in the Gulf of Mexico.
Industry sources and officials have indicated that a revision in domestic petrol and diesel prices is likely only if the lower international oil prices are sustained. Oil Secretary Pankaj Jain confirmed this sentiment, stating that oil companies will consider reducing fuel prices if the lower rates are maintained. This cautious approach stems from a desire to avoid potential losses should international prices rebound after a price cut.
State-owned fuel retailers, currently enjoying significant profits on petrol and diesel sales, are reportedly waiting for a sustained downward trend in oil prices before making any price adjustments. The fear is that a premature price cut could lead to losses if international prices increase again. Emkay Global Financial Services, a brokerage firm, predicts that Indian Oil Corporation (IOC), Bharat Petroleum Corporation Ltd (BPCL), and Hindustan Petroleum Corporation Ltd (HPCL) might reduce petrol and diesel prices ahead of upcoming state elections in Maharashtra.
India, heavily reliant on oil imports (85% of its needs), ties its fuel pricing to international rates. Despite having pricing freedom, oil marketing companies (OMCs) have refrained from adjusting prices in line with costs since late 2021. They froze rates in April 2022, implemented a temporary price cut of Rs 2 per litre before general elections, and subsequently froze prices again. The current price of petrol in the national capital is Rs 94.72 per litre, while diesel stands at Rs 87.62 a litre.
Source: Oil prices fall: Petrol, diesel price cut if decline sustained