Price of India’s crude oil import basket has now slipped below $90 a barrel. Prices in the week ended September 29, 2022 averaged $86.2 per barrel. This fall creates further room for downward revision in the retail selling price of petrol and diesel.
According to the data from the Petroleum Planning and Analysis Cell, a barrel of imported crude cost $121.28 towards the beginning of June as the supply constraint caused by the Russia-Ukraine conflict impacted prices. But prices have been declining continuously since then. On September 27, the crude basket slipped to $84.75, losing 30 per cent from the peak.
The slide could be because of the lower international crude prices, owing to growth slowdown in China and fears of recession in the West. Another reason could be India’s higher procurement of Russian crude. According to a Crisil report, before February, Russia’s share in the annual Indian crude import rarely crossed an average of 2-3 per cent. However, in July, it was about 18 per cent. This was also the time when Indian crude prices began to cool down. According to sources, as of August, Russia is offering a $5-7 per barrel discount to India. Iraq too offers India a $7-9 discount per litre.
International crude oil prices have also been sliding in this period. Price of Brent crude oil too fell from the peak of $127.98 per barrel in March. Prices are down to 88.38 per barrel on September 30.
“Russian crude’s increased weightage in the new basket has helped ease prices post June, given that it was available to India at a good discount post sanctions on Russia,” says Sourav Mitra, Directer- Energy, Crisil.
Despite the decline in cost of imported crude and cooling global crude oil prices, petrol and diesel prices in the country have remained unchanged since May 22. The last change was brought on by the Centre’s reduction of ₹8 per litre in central excise duty on petrol and diesel.
How the prices changed
Prices of petrol and diesel are market-determined in letter. Daily pricing of petrol and diesel are supposed to change every morning at 6 am, based on the price movement in international market since June 2017.
But the revisions are not seamless and regular. The retail price of petrol and diesel remained unchanged from December 2, 2021 to March 22, 2022 due to State assembly elections. After the hike on April 5, It remained unchanged for 45 days, until the excise duty was cut on May 22 by ₹8 and ₹6 for petrol and diesel, respectively.
PPAC data show that historically the increase and decrease of fuel prices in the country were quite erratic. For instance, in FY 21, when the international crude prices were quite low, India saw a hike in petrol prices 76 times. It was lowered only 10 times. In FY22, it was hiked 78 times and lowered only seven times. The ongoing financial year saw five hikes, while the price was lowered once.