Petrol prices in India hit an all-time high of Rs 84.45 litre with oil marketing companies (OMCs) retailing petrol in Delhi, the national capital.
The prices held steady for 29 days and then increased by 26 paise per litre on 6th January and later, by 23 paise on 7th January. The price of diesel was raised on 13th January by 25 paise to be sold at Rs 74.63 per litre in Delhi.
The last record of an all-time high was on 4th October 2018 when the price of petrol was Rs 84 a litre. Diesel had peaked its prices on 30th July 2020 when it retailed at an all-time high of Rs 81.94.
There is an uproar from the public for the government to reduce taxes on fuel. In 2020-21, India, which is the third-largest oil importer globally, increased taxes on petrol and diesel by Rs 13 and Rs 16, respectively. This was done in two divisions through special additional excise duty and road and infrastructure cess.
It is common for India to experience price and supply risks. The standard, Brent crude was trading at $57.24 per barrel on 13th January which has zoomed from $18.38 a barrel April when the pandemic hit and lockdowns were imposed in several countries. West Texas Intermediate was trading at $53.75.
The COVID-19 pandemic hit global energy demand. When successful vaccine candidates were announced, international crude oil prices observed a spike. It is noteworthy that oil prices have been on an upswing since the 13th Organization of the Petroleum Exporting Countries (OPEC)-plus meeting for “adjustments to the production level for February and March 2021.”
The OPEC-plus’ decision in December was to uplift output by 5,00,000 barrels per day from January and make its return to 2 million barrels per day (mb/d). The Opec-plus’ decision is important for India as OPEC accounts for around 40% of global output and 83% of India’s oil imports.
The cost of the Indian basket of crude, which includes Oman, Dubai and Brent crude, was $55.76 a barrel on 12th January. For FY18, FY19 and FY20 averaged at $56.43, $69.88 and $60.47 per barrel, respectively. With the spread of the novel Coronavirus, the prices dropped to $19.90 in April, $30.60 in May, $40.63 in June, $43.35 in July, $44.19 in August, $41.35 in September, $43.34 in November and $49.84 December, per barrel for each, according to data from the Petroleum Planning and Analysis Cell
According to various analysts, India’s transportation fuel demand is on a rise.
S&P Global Platts said in its recent report, “Gas oil demand in India is starting to see signs of a strong revival on the back of robust industrial growth and rising commercial mobility, and is expected to move into top gear when the distribution of COVID-19 vaccines gathers speed later in the year.”
The report added, “Overall, Platts Analytics expects India’s oil demand in 2021 to recover back to slightly above the level of 2019, with the growth of 4,65,000 b/d in the year, after declining by 4,55,000 b/d in 2020.”
An increase in the global prices will affect India’s import bill, flare-up inflation and increase its trade deficit. India spent $101.4 billion on crude oil imports in 2019-20 and $111.9 billion in 2018-19. India is an important refining hub in Asia, with an installed capacity of over 249.36 million tonnes per annum (mtpa). It has 23 refineries and is planning to expand its refining capacity to 400 mtpa by 2025.
The Central Government is working on aiding state-owned oil refiners and private sector companies to issue a coordinated approach for sourcing crude oil, according to Mint reports earlier. The first such calibrated strategy, involving public and private firms which may help save on oil import bills.