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Fuel prices may drop in coming months

Our Mumbai Bureau | Updated on November 27, 2014

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 Car sales this fiscal could be little to write home about this fiscal with numbers dropping by nearly three per cent till end-October. The silver lining in the cloud, though, is that fuel prices could continue to fall with Opec members unlikely to reach a consensus on cutting back global production.

Crude prices have fallen by over 30 per cent in the last six months to levels of $75/barrel. This has helped the Centre to make the most of the situation and deregulate diesel prices. It now looks as if prices could fall even further to $65/barrel by the end of this fiscal which means petrol and diesel will be a lot more affordable too.

For commercial vehicle makers, this would be the best piece of news as diesel accounts for a lion’s share of fleet operator costs. Sales of medium and heavy trucks are only now beginning to show signs of recovery after being in the dumps for nearly two years. Likewise, car buyers may be more inclined to resume buying with cheap fuel as the incentive.

What if the converse happens though and there is a cutback in crude oil supplies? Prices could then start inching upwards which will only make fuel dearer. Will this impact the truck and car sectors or even compel the Centre to roll back its decision on freeing diesel prices? For the moment, this seems very unlikely.

Published on November 27, 2014

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