Price Of Petrol, Diesel Expected To Increase By Upto Rs 12-15 Per Litre, From This Date: Find Out Why?
Petrol and diesel prices have not been hiked for the past four months as assembly elections are on the horizon in five states including Uttar Pradesh. But now, oil marketing companies (OMCs) are bearing the pain of surging crude oil prices with marketing margins being hit severely amidst the Russia-Ukraine conflict.
Crude oil prices are soaring
Crude oil prices rose above $111 a barrel on Friday. There is a lot of volatility in the market because of fears over disruption to Russian oil exports. Western sanctions are also counteracting the prospects of more Iranian supplies in the event of a nuclear deal with Tehran.
The price of crude oil India buys has risen to $117.39 per barrel on March 3, the highest it has ever been since the year 2012, as per the information from the Petroleum Planning and Analysis Cell (PPAC) of the oil ministry. The current prices are higher than the average of $81.5 per barrel price of the Indian crude oil in early November last year when prices of petrol and diesel froze.
Volatile market due to Russia-Ukraine conflict
Signs of escalation in the Russia-Ukraine conflict and a reported fire at a Ukrainian nuclear power plant, scared markets until authorities stated the building where the incident occurred was identified as a training centre and the fire was extinguished.
Russia makes up for about a third of Europe’s natural gas imports and about 10% of the global oil production. However, for India, Russian supplies make up a very small percentage of the total imports. Per day, India imported 43,400 barrels of oil from Russia in 2021 which is approximately 1% of the country’s overall imports. Coal imports from Russia were 1.8 million tonnes in 2021 which accounted for 1.3% of all coal imports. India also buys 2.5 million tonnes of Liquefied Natural Gas (LNG) a year from Gazprom of Russia.
Therefore, supplies are not a big worry for India. The biggest concern for India at the moment are the soaring fuel prices. Domestic fuel prices are inextricably linked to international oil prices and India imports 85% of its oil.
Fuel prices frozen due to elections
Despite these facts, the prices have not been revised for 120 days in a row. Prices are supposed to be revised on a daily basis but the state-owned fuel retailers IOC, BPCL and HPCL have frozen rates as elections for new governments in Uttar Pradesh, Punjab and three other states are in order. The final phase of election polling for Uttar Pradesh’s legislative assembly is on March 7 and vote counting is on 10th March.
Just to break-even, Petrol and diesel prices need to be increased by over ?12 per litre by March 16, according to a report by ICICI securities.