Kolkata: Crude oil prices in the global markets are quickly descending close to the pre-war levels, offering major relief to economies around the globe
and triggering the question, how far are we from a cut in the retail prices of petrol and diesel. With the Strait of Hormuz allowing free passage to tankers and other ships, reports are even stating concerns of a short-term glut in energy supplies. Brent crudehas descended close to $72 per barrel. The Strait of Hormuz control about 20% of the global crude oil supply and its restoration has eased the situation and brought the prices down.
Latest priceline of crude oil
Data from Trading Economics show that West Texas Intermediate has declined below the psycologically important $70 mark. It is trading $69.552 per barrel, marking a decline of 1.12%. Brent crude has declined to $72.896 per barrel, showing a fall of 1.14%. The price just before thee war broke out on February 28, Brent crude was trading at $72 per barrel. The current prices of both benchmark vareity have thus reached important levels.
The Indian crude oil basket
The Indian crude oil basket, or the average price at which India is importing crude oil this month has come down in tandem and has reached $74.34/bbl till June 23, revealed PPAC data. PPAC is the data arm of the petroleum ministry. This is the actual indicator of how close India is to the pre-war crude level. Significantly, the price of crude that India bought before the war was $70.70, according to the PPAC data.
Will petrol and diesel prices be cut?
A drop in global crude oil prices alone cannot automatically lower retail petrol and diesel prices in India. Domestic fuel pricing depends on several factors and apart from the global price level, the value of the rupee with respect to the dollar is crucial. Also important are central and state taxes, which make these two fuels one of the most highly taxed in India. The fall in the value of the rupee against the US dollar — majorly an outcome of the surging crude prices after the war — is an obstacle to the global lower prices translating for lower payments by Indian refiners.
However, if crude oil prices in the international market remain low for an extended period and there are no significant increases in other costs, there is a possibility of relief regarding petrol and diesel prices in the future. However, it would be premature to expect an immediate cut in fuel prices based solely on this decline in crude oil rates. Petroleum minister Hardeep Singh Puri has recently stated that the refiners are using old crude and as the newly-purchased crude is used, the new calculations will kick in. However, despite the broad indication, he has not said anything specifically on the possibility of lower fuel prices, which can actually spin gains for the economy including lower inflation.
