Despite the recent slump in international prices of crude oil, public sector oil marketing companies (OMCs) are likely to wait a little longer before passing on the benefit to consumers and returning to the practice of daily revision in prices of petrol and diesel, a top petroleum ministry official said, adding that the international prices continue to be highly volatile. Softening of oil prices in recent weeks had led to speculation that the OMCs—Indian Oil Corporation (IOC), Bharat Petroleum Corporation (BPCL), and Hindustan Petroleum Corporation (HPCL)—could reduce pump prices of petrol and diesel and revert to daily price revisions, which they had suspended over two years ago when international oil and fuel prices had touched multi-year highs amid extreme volatility due to multiple reasons, including the outbreak of the Russia-Ukraine war. Since then, retail prices of petrol and diesel have been revised rarely—on a couple of occasions due to excise duty reductions and once just before this year’s Lok Sabha polls. Currently in Delhi, petrol is priced at Rs 94.72 per litre, while diesel is being retailed at Rs 87.62. Fuel prices vary from one state to the other due to differences in state levies. “We are still seeing a lot of volatility in prices. Yesterday, the US Federal Reserve announced a rate cut. Similarly, there are a lot of decisions globally (which can affect oil prices) that are going through the system. People are looking at various new data points. For example, how much is the drawdown of crude? What is China’s PMI looking like? What kind of numbers are coming out of China in terms of purchase and storage of crude, refinery margins, refinery bankruptcies, etc. All kinds of new information are coming out every day,” said the official, who did not wish to be identified. India is the world’s third-largest consumer of crude oil and depends on imports to meet over 85 per cent of its requirement. This makes fuel prices in India extremely sensitive to prices in the international market. “We also need to understand that the impact of these factors operates with a lag effect,” the official said, adding that the OMCs and the government want the international prices to stabilise before taking any call. The official said that multiple factors that make up the pricing equation need to be carefully analysed before a call is taken. These factors include international oil prices, fuel spreads or margins, dollar-rupee exchange rate, outlook on prices, and market volatility assessments, among others. Global benchmark Brent crude had slipped to under $70 per barrel on September 10—the first such instance since December 2021—but has climbed to over $74 per barrel over the past nine days. In early July, Brent was trading at over $85 per barrel. In the first week of April, Brent had breached the $90 mark after over five months. Although these prices are significantly lower than the levels seen in 2022, industry officials say that they are prone to volatility given the unpredictable geopolitical situation in some regions and production regulation by major global oil producers. The recent slump in oil prices has mainly been on account of concerns of oil demand in China, a top importer of crude oil. As per industry insiders, OMCs would be comfortable in reverting to daily fuel price revisions once international crude oil prices stabilise under $80 per barrel. Given the current pump prices and margins on the two automobile fuels in the international market, an oil price level of under $80 would ensure that the OMCs would not have to bear any under-recovery on petrol and diesel sales.
