First, the good news, for people like us. Petrol and diesel prices may get cut in the coming days.
That’s bad news for the oil business, and international finance and trade in general, though.
There is nothing official about the price cut, though. Petrol and diesel prices have remained constant for quite some time now, with petrol peaking on the wrong side of Rs 100 a couple of years ago in the aftermath of Russia’s invasion of Ukraine. And while the rumours abound due to the falling price of international crude oil, there is no surety to this ‘good’ news until an official announcement comes through.
But bad news abounding for the oil trade is very real. Brent crude dipped below $70 on Tuesday hitting a low of $68, with warning lights going off across OPEC and other petroleum producers. The impact was felt today by government-owned ONGC and Oil India, as their shares fell 6 per cent on the BSE during the day. The drop is a more pronounced 26 per cent in just over the last 12 days, mainly a reflection of the price fall in the international markets.
The drop in oil prices, ostensibly due to falling demand, is even more astounding considering that there are at least two active wars going on right now globally — Gaza as well as Ukraine. Instead of leading to prices spiralling, the impact has been tepid, except for the initial few weeks in February 2022 when Russia invaded Ukraine.
For India, the drop in prices could be an advantage, as the nation imports a vast majority of its petroleum requirements. While it hit a bonanza of cheap Russian oil (due to western sanctions on Russian oil following Ukraine) for a good chunk of 2022 and 2023, the price drop now could be quite a boon.
To put it in perspective, according to the Petroleum Planning & Analysis Cell of the government, India paid nearly $90 on average for a barrel of crude oil (Indian basket) back in January this year — which has this month fallen to just $74 dollars. According to ICRA, aviation fuel prices, which were up till July, started falling last month. Just over 2 per cent last month and nearly 18 per cent this month so far. No wonder, Suyash Gupta, director general of the Indian Auto LPG Coalition said, “Decline in crude oil prices presents a unique opportunity for India to reassess and strengthen its energy strategy.”
