Global Prices Rule Too High For Comfort

Domestic/Energy

The domestic oil marketing companies are contemplating another increase in retail prices of petrol and diesel.

This will have to be done to pass on part of the higher costs incurred by these companies following the rise in international prices of crude to around $ 34 a barrel.

Some relief could have been provided through reduction in duties payable on oil import. However the finance minister has not announced any duty concession on crude oil and petroleum products yet.

Though the international prices of crude have softened a bit on the assurance of Organisation of Petroleum Exporting Countries (OPEC) to increase production in the event of a war in Iraq, it is expected that prices in the market would flare up once again if the war actually broke out.

Part of the price rise would be driven by panic buying and part by shortfall in crude supply on account of disruption of oil supplies from Iraq, a major producer and exporter.

As information released on Wednesday indicated, the Opec member countries do not have the surplus capacity to make up for the entire shortfall that would arise if Iraqi production and exports were stopped by war.

Though the worst of low winter temperatures has passed in the developed nations and oil requirement for heating purposes had come down, many developed countries including the USA had low reserves and therefore may have to buy crude irrespective of price. These planned purchases to cover inventory shortfall would further drive up prices.

The prices of international benchmark Brent crude, which were hovering around $34.06 a barrel on March 5, moved up to $ 34.73 a barrel on March 10, only to come down to $ 33.96 a barrel the following day.

Jet fuel (Singapore), which was quoted around $ 40.88 a barrel on March 5, jumped to $ 42.35 a barrel on March 10, and moved down to $ 39.83 a barrel the next day.

High speed diesel (Singapore) was quoted around $ 40.48 a barrel on March 5, $ 41.53 a barrel on March 10, and $ 39.98 a barrel on March 11.

Naphtha (Singapore) prices also moved in tandem with the other petroleum product prices. It was quoted around $ 38.78 a barrel on March 5, $ 43.20 a barrel on March 10, and $ 41.85 a barrel on March 11.

Unleaded petrol (fob Singapore), which was ruling at $ 41 a barrel on March 5, moved up to $ 43.40 a barrel on March 10, and lowered to $ 43.40 a barrel on March 11.