Petrol and diesel prices were hiked early this week by 82 paise and 61 paise (per litre) respectively. This is the first increase in many months since the time crude oil prices began falling from June last year. It was less than a fortnight ago when these two auto fuels saw their prices fall by upwards of 2.20/lt and, today, their price differential is barely 10/litre.

So, is this the beginning of a gradual price spiral which will see petrol and diesel becoming dearer in the coming months? Not many within the oil industry believe high prices are here to stay. In fact, there are a host of contrarian views which suggest that crude prices, now at a little over $62/barrel, could even crash to under $40/bbl in the coming months. Should this happen, this will be the best piece of news to car buyers and help manufacturers generate more sales.

However, if the converse occurs and crude begins steadily climbing to over $70/bbl, diesel and petrol prices will also keep pace with this increaseIt is only during a regime of high global prices that the Centre’s intent on free market prices will be sorely tested.

Over the last six months, the crude price crash has been the best of news on the fiscal deficit front but this may just not last. There is no telling when a fresh bout of tension in oil-producing countries will trigger another price hike.