New Delhi: Petrol and diesel prices in India are likely to increase after Assembly elections in five states end next week, to cover the Rs 9 per litre-gap caused by international oil prices that zoomed past USD 100 a barrel. However, there has been no official word from the government yet.
International crude oil prices have gone past USD 110 a barrel for the first time after mid-2014 on apprehensions that oil and gas supplies from Urals crude supplier Russia could be blocked, either by the conflict in Ukraine or retributive Western sanctions.
On March 1, the cost of India’s basket of crude oil increased more than USD 102 per barrel, the highest price since August 2014, according to information from the Petroleum Planning and Analysis Cell (PPAC) of the oil ministry, PTI has reported. In early November 2021, the barrel price of the Indian basket of crude oil on average stood at USD 81.5 at the time of freezing of petrol and diesel prices.
“With state elections getting over next week, we expect daily fuel price hikes to restart across both gasoline and diesel,” JP Morgan said in a report.
State-owned fuel retailers Indian Oil Corporation (IOC), Bharat Petroleum Corporation Ltd (BPCL) and Hindustan Petroleum Corporation Ltd (HPCL) are registering a loss of Rs 5.7 per litre on petrol and diesel price. This is without taking into account their normal margin of Rs 2.5 per litre, the PTI report stated. Prices need to increase by Rs 9 a litre or 10 percent to revert normalised marketing margins, JP Morgan said in its report.
Russia makes up for a third of Europe’s natural gas and about 10 percent of global oil production. About a third of Russian gas supplies to Europe usually travel through pipelines crossing Ukraine, the PTI report noted.
however, Russia accounts for a very small percentage of India’s oil supplies. While India imported 43,400 barrels per day of oil from Russia in 2021 (about 1 percent of its overall imports), coal imports from Russia at 1.8 million tonnes in 2021 made up for 1.3 percent of all coal imports, according to the report. India also purchases 2.5 million tonnes of LNG a year from Gazprom of Russia, it added.
“To summarise, in the event of completely shutting Russian oil supply (that is partially offset by a resumption of Iran exports and the use of strategic oil reserves), crude oil was forecast to rise to USD 150 per barrel.
“However, in the event sanctions spared energy transactions but were intensified in other areas, our baseline view was that crude prices would rise to average USD 110 in 2Q22 (April-June) with prices spiking to USD 120 a barrel in the interim as markets priced retaliatory measures by Russia, such as curtailing oil supply,” JP Morgan said.
India Blooms News Service