The Economic Times | Fuel price cut hopes rise as crude oil prices drop to lowest since January

Nov 28,2022

A huge drop in crude oil prices have rekindled hopes in India of a possible reduction in fuel prices.

Benchmark Brent crude fell to its lowest since January on Monday, with prices dropping $2.6/barrel, or more than 3%, to $80.97. Apprehension over another production cut by the Opec+ grouping of oil exporters, including Russia, has contributed to the sharp fall.

The fall in Brent crude oil prices has brought down the cost of ‘Indian Basket’ – or the mix of crude bought by Indian refiners – to $82/barrel from an average of $112.8 in March.

This fall has raised hopes of a fuel price cut in India as the current petrol and diesel prices reflect oil at about $85/barrel.

Petrol and diesel prices are supposed to be revised daily but state-owned fuel retailers have not exercised their rights since April 6. Rates have been on freeze since then except on May 22 when prices were reduced following a cut in excise duty.

Prior to the April freeze, petrol and diesel prices had gone up by Rs 10 per litre each.

Petrol currently costs Rs 96.72 a litre in the national capital and diesel is priced at Rs 89.62.

Earlier this month, Oil Minister Hardeep Singh Puri said that PSU oil companies are still losing a net Rs 4 per litre on diesel while their margins have turned positive on petrol. The under-recovery - difference between the retail selling price and the international rate - currently is about Rs 27 per litre on diesel but the actual cash loss (the loss based on the actual cost of procurement of crude oil and turning it into fuel) is about Rs 3-4 per litre.

If the price reduction happens, this will be the first cut since May 22 when the government cut excise duty on the two fuels to shield customers from high global prices and rein in inflation.