Domestic fuel prices set to reduce as international crude oil rates plunge 10%
State-run oil companies will now have some room to cut domestic fuel prices as international crude oil rates have slumped 10% in about a fortnight. Crude oil has fallen to $64 a barrel from $71 a barrel earlier this month on weakening demand recovery prospects as European cities planned mobility restrictions amid rising Covid cases.
Oil prices had risen on producing countries’ decision to extend the supply cut pact into April. The anticipation of quicker demand recovery due to wider vaccine roll out and the big US stimulus also helped boost prices.
With some major economies again imposing lockdown in some cities, the demand recovery is expected to falter, resulting in pressure on prices, analysts said.
Falling prices could help state-run companies cut fuel prices ahead of assembly polls, an industry executive said. Domestic fuel prices have been unaltered since February 27 across the country, with rates of petrol & diesel frozen at Rs 91.17 and 81.47 per litre, respectively, in Delhi.
Petrol and diesel prices are up by Rs 7.5 per litre since the beginning of the year. Higher prices have affected the demand for fuels in February. The demand for diesel, which makes up about 40% of the local oil demand, contracted 8.5%. Petrol sales declined by 6.5%.
State-run oil companies are expected to daily revise the prices of petrol and diesel by aligning them with international rates and factoring in currency movements. But they do not always do so, making it harder to predict domestic price patterns.
Taxes comprise nearly 60% of the current fuel prices, which are at record levels. The central government has refused to bring down taxes while a few states have made small cuts.