Economy

With poll party over, fuel-price hikes may soon pinch wallets

Twesh Mishra New Delhi | Updated on May 20, 2019 Published on May 20, 2019

Rise could range from ₹1 to ₹2 a litre in the short term

Indian auto-fuel consumers should brace for a hike in petrol and diesel prices in the coming days with the Lok Sabha elections coming to a close. But the hikes are not expected to be steep, as globally, product and crude oil prices are expected to remain range bound, industry insiders said.

The hike, in the short term, could happen in trickle and range between ₹1 and ₹2 a litre on both auto fuels in line with the near- term product and crude price trends, they said.

India’s public sector oil companies benchmark their product prices as per global trends. But despite the firming up of global product and crude oil prices during the month-long seven-phase general elections in India, the price of petrol and diesel has marginally fallen in India during the period.

Postponing the hike

Although the prices of auto fuel have been technically decontrolled, there is a perception in the market that Indian public sector oil marketing companies may have held on to any price hike during the elections period, despite the firming up of global crude oil prices. The objective may have been to soften the burden on the consumers’ wallets at least during the election season.

An oil industry analyst also pointed out that Indian public sector marketing companies had, in the January-March quarter, not cut end-product prices despite softer cruder oil prices in order to gear up for the election season and make good the losses they may have to face by holding the price during the period.

According to IndianOil, the price of petrol has fallen from ₹72.80 a litre on April 11 to ₹71.03 a litre on May 19. The price of diesel has fallen to ₹65.96 a litre on May 19 from ₹66.11 on April 11.

During this period, the average price at which Indian refiners import crude oil has firmed up. In April this year, the Indian basket of crude oil averaged $71 a barrel. In March, the Indian basket of crude averaged $66.74 a barrel.

Commenting on the possible rise in fuel prices, MK Surana , Chairman & Managing Director of Hindustan Petroleum Corporation, said: “The product price depend on how the cracks move. In crude prices, there is an immediate movement, but the same movement is not seen on the cracks... like the gasoline (petrol) prices remain between $5 and $7 a barrel and diesel prices are between $12 and $14 a barrel.”

“Right now, the prices (of Brent crude) are in an area which is slightly unpredictable. There is uncertainty on both demand and supply side…Considering that all the factors remain the way they are and there is no further escalation, then, in the immediate future, it will be around $70-75 a barrel.”

According to Bloomberg data, Brent crude stood at $71.55 a barrel on April 11 and closed at $73.22 a barrel on May 20.

This is being assessed as a ₹1- 2 a litre hike in auto fuel prices.

US-China trade impact

Highlighting the concerns that drive up price, Surana said: “On the demand side, the US-China trade agreement will influence the risk perception. The second thing is some of the economies such as the OECD (countries) have shown weakening. So, that is a demand-side concern.

“On the supply side, there are concerns regarding Venezuela, the OPEC meeting and the Middle East situation, which is slightly tense now. US production and the collaboration between non-OPEC countries and OPEC countries regarding supplies is also a factor to be looked into,” he added.

 

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Published on May 20, 2019
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