A rally in the price of crude oil is pushing domestic petrol and diesel prices towards new highs. The price of petrol was up 20 paise per litre and diesel by 25 paisa a litre on Tuesday. After the latest revision, petrol sold at Rs 101.39 a litre while diesel retailed at Rs 89.57 a litre in the national capital.
The highest selling price for petrol is Rs 101.84 a litre and for diesel is Rs 89.87 a litre. Prices remained at these levels for most of July 2021 and softened moderately in August 2021.
The Indian basket of crude oil, an estimate of the price at which domestic refiners bought crude oil, averaged $71.63 a barrel in July and $73.46 in August 2021. It stood at $76.89 a barrel on September 27, according to the Petroleum Planning and Analysis Cell.
Brent crude, a benchmark for nearly 80 per cent of global crude oil trade, crossed $80 a barrel on Tuesday. It was trading at $71.59 a barrel on September 1. This rise is on the back of supply concerns about Organization of the Petroleum Exporting Countries (Opec)'s ability to meet the rising demand.
For consumers, roughly every dollar increase in crude prices causes 30-50 paisa hikes in petrol and diesel prices.
Correspondingly, oil companies had started to raise the retail price of diesel on September 24. Before this, the price of diesel was last increased on July 15. On the other hand, the retail price of petrol was spared a hike by oil companies till Tuesday. The last increase in retail price of petrol was on July 17.
According to a PSU company official, reports indicate supply tightness that continues to draw on inventories across all regions. Rising gas prices are also helping drive oil higher. Opec+ (a group of OPEC and allied countries) is also facing difficulties increasing production as under-investment or maintenance delays persist from the pandemic.
“Crude Oil prices have reached to near three-year high as global output disruptions have forced energy companies to draw more crude oil out of their stockpiles. Accordingly, US crude oil inventory levels are also nearing a three-year low,” the official said.
“Global demand for crude oil has been increasing consistently with the easing of pandemic restrictions and improving vaccination rates. On the supply side, OPEC+ alliance has been slow in easing output restrictions, contributing to the tightened supply in the market,” the official added.
Domestic oil company officials are of the view that crude oil prices can go up to $ 85 a barrel in the near term. This will in turn result in more expensive petrol, diesel, Liquefied Petroleum Gas (LPG) and Aviation Turbine Fuel (ATF).
According to Prashant Vasisht, Vice President and Co-Head, Corprate Ratings, Icra, “India's dependence on imports of crude oil was to the extent of 86 per cent for domestic consumption in financial year 2020-2021. Import dependence is likely to remain at 86-87 per cent for financial year 2021-2022 as well.”