India’s average crude oil import price has dropped below $70 a barrel for the first time since the West Asia conflict began, offering some relief to the country’s oil import bill. However, consumers are unlikely to see an immediate reduction in petrol and diesel prices.
The average price of the Indian basket of crude fell to $68.86 a barrel on June 26. The decline comes after crude prices had surged during the conflict, touching a peak of $157.04 a barrel on March 23, per a report by Hindustan Times.
India imports more than 88 per cent of the crude oil it processes, making global price movements crucial for domestic fuel costs.
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OMCs continue to face diesel losses
State-run oil marketing companies (OMCs) had faced heavy losses as retail fuel prices remained largely unchanged despite rising international crude prices. According to people familiar with the matter and quoted by HT, public sector fuel retailers are currently earning marketing margins of around Rs 5-6 per litre on petrol.
However, losses on diesel sales continue, with companies reportedly losing around Rs 8-Rs 10 per litre.
The government had reduced excise duty on petrol and diesel by Rs 10 per litre each on March 27 to help ease the burden on consumers and oil companies. Despite this, losses widened as crude prices continued to rise during the conflict.
Strait of Hormuz disruption affected supplies
The closure of the Strait of Hormuz, a major global energy route, added to concerns as nearly one-fifth of the world's oil trade passes through the waterway. Rising tensions pushed international crude prices higher, forcing OMCs to increase petrol and diesel prices between May 15 and May 25.
However, oil prices began to soften after progress towards a US-Iran peace agreement and the signing of a memorandum of understanding in mid-June.
Government cites stable fuel supplies
Petroleum Minister Hardeep Singh Puri said India had protected consumers from the global energy shock despite supply disruptions.
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He said the country’s diversified crude sourcing and investments in storage and pipeline infrastructure helped maintain uninterrupted fuel supplies. India also avoided the fuel shortages and rationing seen in several other countries during the crisis.
FAQs:
Why are petrol and diesel prices not falling despite lower crude prices?
OMCs are still recovering earlier losses, especially on diesel sales.
What is the current price of India’s crude oil basket?
The Indian crude basket fell to $68.86 a barrel on June 26.
