Why Centre thinks crude oil situation still slippery for retail fuel price cut
Oil companies continue to sell fuel refined from costlier crude bought at the peak of the West Asia war, says the government
The Opposition Congress has criticised the Narendra Modi government on this account. Party president Mallikarjun Kharge has said that when the conflict had pushed crude oil prices to about $138 a barrel, petrol in India was selling at a retail price of Rs 94.8 a litre and diesel at Rs 87.7 a litre. However, while crude oil prices have dropped to about $70 a barrel, petrol costs Rs 102 a litre and diesel Rs 95.2.
On July 3, Brent crude prices were trading at $71.8 a barrel in the international market. Crude oil price for the Indian basket was $67.7 a barrel in July, compared to $83.2 in June, $106.2 in May and $114.5 a barrel in April.
State-owned petroleum companies had raised petrol and diesel prices by four times since the start of the war between US-Israel and Iran. These revisions resulted in a cumulative hike of Rs 7.5 per litre. The justification given by Union petroleum minister Hardeep Singh Puri was that state-owned oil refiners and marketers were bleeding since they had not passed on the increase in crude oil rates to consumers. On May 15, the Centre raised fuel prices by Rs 3 per litre, the first time in four years. This was followed by a series of hikes over the next few days.
Oil marketing companies Indian Oil Corporation, Bharat Petroleum and Hindustan Petroleum had reportedly lost as much as Rs 1,000 crore a day before the price hike was announced. It was then estimated that the Rs 3 hike would yield an additional monthly revenue of a little over Rs 4,400 crore. But considering that oil marketing companies’ losses even for a month were upwards of Rs 30,000 crore, it was clear that there would be more price hikes.
But now, with crude prices falling, the expectation is that fuel prices have to be brought down too. But the Centre is not willing to do that too soon as is clear from Puri's statement. On July 2, he said consumers should not expect any price cut just because the crude prices have dropped globally. The reason, according to him, is that oil companies are still selling fuel refined from costlier crude bought during the peak of the West Asia conflict.
According to Puri, oil marketing companies’ actual losses during the war stood at Rs 74,781 crore for the April to June period as they bought crude at high cost. The Centre would want to wait for two to three months before taking a decision on price cuts, he said.
Apart from the fact that oil marketing companies had bought the oil being refined today in advance at higher prices, the Centre’s argument is that there could be more fluctuations in crude oil prices at the international level.
Although peace talks have taken place between the US and Iran recently, there are still no concrete signs of what would be a lasting peace in the region. That would be weighing on the Modi government’s mind when it comes to the question of lowering retail fuel prices.
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The Opposition Congress has criticised the Narendra Modi government on this account. Party president Mallikarjun Kharge has said that when the conflict had pushed crude oil prices to about $138 a barrel, petrol in India was selling at a retail price of Rs 94.8 a litre and diesel at Rs 87.7 a litre. However, while crude oil prices have dropped to about $70 a barrel, petrol costs Rs 102 a litre and diesel Rs 95.2.
On July 3, Brent crude prices were trading at $71.8 a barrel in the international market. Crude oil price for the Indian basket was $67.7 a barrel in July, compared to $83.2 in June, $106.2 in May and $114.5 a barrel in April.
State-owned petroleum companies had raised petrol and diesel prices by four times since the start of the war between US-Israel and Iran. These revisions resulted in a cumulative hike of Rs 7.5 per litre. The justification given by Union petroleum minister Hardeep Singh Puri was that state-owned oil refiners and marketers were bleeding since they had not passed on the increase in crude oil rates to consumers. On May 15, the Centre raised fuel prices by Rs 3 per litre, the first time in four years. This was followed by a series of hikes over the next few days.
Oil marketing companies Indian Oil Corporation, Bharat Petroleum and Hindustan Petroleum had reportedly lost as much as Rs 1,000 crore a day before the price hike was announced. It was then estimated that the Rs 3 hike would yield an additional monthly revenue of a little over Rs 4,400 crore. But considering that oil marketing companies’ losses even for a month were upwards of Rs 30,000 crore, it was clear that there would be more price hikes.
But now, with crude prices falling, the expectation is that fuel prices have to be brought down too. But the Centre is not willing to do that too soon as is clear from Puri's statement. On July 2, he said consumers should not expect any price cut just because the crude prices have dropped globally. The reason, according to him, is that oil companies are still selling fuel refined from costlier crude bought during the peak of the West Asia conflict.
According to Puri, oil marketing companies’ actual losses during the war stood at Rs 74,781 crore for the April to June period as they bought crude at high cost. The Centre would want to wait for two to three months before taking a decision on price cuts, he said.
Apart from the fact that oil marketing companies had bought the oil being refined today in advance at higher prices, the Centre’s argument is that there could be more fluctuations in crude oil prices at the international level.
Although peace talks have taken place between the US and Iran recently, there are still no concrete signs of what would be a lasting peace in the region. That would be weighing on the Modi government’s mind when it comes to the question of lowering retail fuel prices.
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