Aramco unit attack in Saudi Arabia's Jeddah may raise crude, LPG prices

Along with the war in Ukraine, the missile attack and fire at an Aramco oil distribution facility in Saudi Arabia’s Jeddah is likely to raise crude oil prices further.

Also, the availability of liquefied petroleum gas (LPG) could be hit and LPG prices could go up further.
 

In 2019, when a similar attack happened in Saudi Aramco’s facilities, a shortfall in assured supply from Aramco resulted in a huge booking backlog for LPG across states such as Maharashtra, Karnataka, Punjab and Goa. This backlog extended up to even 15 days.
 

On the other hand, industry sources said that oil marketing companies (OMCs) are losing around Rs 250 on every domestic cylinder.
 

“We are not seeing any immediate impact. We have a diversified basket, and hence, the country is mitigating the risk in terms of LPG and crude oil,” said an Indian Oil Corporation (IOC) source.
 

Driven by the rise in crude oil prices from $41 a barrel in November 2020 to around $121 now, Saudi Aramco hiked the price of LPG from $376.3 per metric tonne (MT) in November to $769.1 in March. This was up 5.9 per cent from $726.4 per MT in January.  Prices of LPG in the country are based on Saudi Contract (CP), the benchmark for international prices of LPG.
 

“I feel LPG prices may increase next month due to a sharp increase in international crude prices. As the rise is sharp, prices may increase in portions,” said Pawan Soni, general secretary of the Federation of LPG Distributors of India.
 

After the recent state elections, the cost of domestic LPG cylinders increased by Rs 50 across the country, the first hike since October 6, 2021. The prices of a 14.2 kg non-subsidised domestic LPG cylinder has increased from Rs 899.50 to Rs 949.5 in the National Capital Region (NCR). “Owing to the Saudi Aramco attack, we also expect an LPG shortfall in India after 20 days,” said Chandra Prakash, president, All India LPG Distributors’ Federation.
 

Two storage containers at the Aramco facility went up in flames due to the attack by the Houthi rebels from Yemen. They also threatened to disrupt a Formula One race set to take place in Jeddah. Following this, international crude prices also increased to over $121 a barrel. The prices of petroleum products in the country are linked to the price of respective products in the international market. However, the government continues to modulate the effective price to consumers for subsidised domestic LPG.
 

The subsidy, as admissible, is credited to the bank account of eligible beneficiaries. Intere­stingly, direct benefit transfer on LPG was seen at Rs 3,559 crore in 2020-21 as compared to Rs 24,468 crore in 2019-20.

Fuel prices hiked for fifth time in six days 

Petrol price on Sunday was hiked by 50 paise a litre and diesel by 55 paise, taking the total increase in rates since resumption of daily price revision less than a week back to Rs 3.70-3.75 per litre.
 

Petrol in Delhi will now cost Rs 99.11 per litre as against Rs 98.61 previously while diesel rates have gone up from Rs 89.87 per litre to Rs 90.42, according to a price notification of state fuel retailers.
 

Rates have been increased across the country and vary from state to state depending upon the incidence of local taxation.

This is the fifth increase in prices since the ending of a four-and-half-month long hiatus in rate revision on March 22. On all the previous four occasions, prices had been increased by 80 paise a litre — the steepest single-day rise since the daily price revision was introduced in June 2017. In all, petrol prices have gone up by Rs 3.70 per litre and diesel by Rs 3.75 in six days.

Prices had been on a freeze since November 4 ahead of the Assembly elections in states like Uttar Pradesh and Punjab — a period during which the cost of raw material (crude oil) soared by about $30 per barrel.
 

The rate revision was expected soon after counting of votes on March 10 but it was put off by a couple of weeks apparently to not give opposition leaders like Rahul Gandhi a handle to say that they had rightly predicted that prices will go up after elections. Congress and other opposition parties have criticised the government for the price rise saying it has added to the burden on common man reeling under general commodity price rise. The increase in retail price warranted from crude oil prices rising during the 137 day hiatus from around  $82 per barrel to $120 is huge but state-owned fuel retailers Indian Oil Corporation, Bharat Petroleum Corporation and Hindustan Petroleum Corporation are passing on the required increase in stages.