Global Oil Price Drop Worries Ministry

While the world crude oil prices have come down to below $24 a barrel from $34 a barrel in March, the petroleum ministry is not yet displaying its happiness over this steady softening.

Though the ministry is relieved that the turnaround in crude prices will help contain deficit in the oil pool account, it is apprehensive that it may give fillip to the demand for rolling back the recent hike in prices of domestic LPG and kerosene distributed through public distribution system.

The ministry has calculated that in case there is a further drop in crude prices and Brent is quoted at $22 a barrel, the deficit in the country's oil pool account will still stand at Rs 6,000 crore on March 31, 2001, against the earlier anticipated Rs 13,000 crore.

 

The country's oil import bill for 2000-01 at $22 a barrel is expected to be around Rs 64,000 crore against Rs 72,000 crore at $25 a barrel.

Officials say the prices could be rolled back only if the world crude prices crash to below $20 a barrel. Only at this level, they say, the oil pool may show a nil deficit.

However, the ministry is certain that the prices will not fall below $22 a barrel since the Organis-ation of Petroleum Exporting Countries (Opec) has decided to ensure that the prices move in the $22 to $28 band. In case the prices go below $22 a barrel, Opec may ask its member-countries to reduce production to help the prices move up.

In March, Opec had decided to raise the production by 1.45 million barrels per day to check the spiralling oil prices. It has decided to meet again in June to review the price situation and decide on its further course of action.

Taking a cue from the Opec decision, most political parties, including some members of the ruling National Democratic Alliance, have been demanding a rollback of the more than 100 per cent increase in the PDS kerosene prices and around 30 per cent hike in the prices of domestic LPG effected from the midnight of March 22-23.

These parties have been arguing that since the oil prices have been coming down after Opec's decision to raise production, there is a case for the rollback of prices.

However, petroleum minister Ram Naik has been refusing to accept the rollback demand, arguing the government had been paying a subsidy of Rs 7.83 on a litre of kerosene, Rs 162 on a cylinder of LPG and Rs 1.06 on a litre of aviation turbine fuel (ATF).