Fuel prices come under pressure as Brent crude climbs to $92 a barrel

Petrol and diesel prices in India have come under pressure with Brent crude oil trading at $92.97 a barrel on Friday. Brent is the most popular marker for crude oil trade and is used as a benchmark for two-thirds of the world's internationally traded crude oil. This has translated to a rise in the price of petrol and diesel in the international market as well.

Responding to a query in Lok Sabha on Thursday, Petroleum Minister Hardeep Puri said that the Indian Basket of Crude oil (an assessment of the average price at which Indian refineries buy crude oil) has seen a rise of $17 a barrel from $71.32 a barrel on December 1, 2021 to $88.83 a barrel on January 27, 2021. The Indian basket closed at $89.12 a barrel on February 3, 2022 and will rise more if Brent hardens.

chart

According to Puri, the retail selling price of Petrol and Diesel in India are linked to their respective international product prices.

“The international prices of Petrol considered in pricing in the country have risen from $79.55 a barrel on December 1, 2021 to $101.44 a barrel on January 27, 2022. The international prices of Diesel considered in pricing in the country have risen from $78.48 a barrel on December 1, 2021 to $102.70 a barrel on January 27, 2022,” Puri said.

But Public Sector Undertaking (PSU) Oil Marketing Companies (OMCs) have kept the sale price of auto fuels in the country unchanged since. This puts pressure on the margins of oil companies that are selling auto fuels are prices lower than they desire to. This politically unpopular move is kept in abeyance in light of looming assembly elections in five states.

Commenting on the reasons for higher crude oil prices, Puri said, “There have been major fluctuations in international prices of Crude Oil in recent few months due to various global events including lower than expected restorations of production by OPEC nations, increase in demand as the world economy recovers from disruption caused due to Covid-19 and its variants, geo-political tensions, lower than usual inventory levels in major consuming nations, and effects of reduced investments in Crude Oil production facilities over the past few years.”

While India has been reaching out to oil producing nations to raise crude oil and temper the runaway prices, but these efforts have largely been unfruitful.

In January, Puri had a telecall with the Sultan Al Jaber, the Managing Director and Group Chief Executive Officer (CEO) of the Abu Dhabi National Oil Company (ADNOC), the national oil company of oil rich United Arab Emirates (UAE). In a tweet, Puri said that that the two deliberated on various issues relating to the bilateral energy partnership. He also condemned the terror attack on the UAE in which two Indian’s had lost their lives.