Indians are hoping for a sustained decrease in global oil prices to alleviate the burden of high petrol and diesel costs, which contribute to inflation and strain household budgets.
Pankaj Jain, Secretary of the Ministry of Petroleum and Natural Gas, stated that oil companies are likely to lower fuel prices if crude oil prices remain low over a prolonged period. Recently, oil prices have fallen to their lowest in nearly three years, boosting the profitability of fuel marketing companies and potentially setting the stage for reduced pump prices, especially before upcoming elections in Maharashtra and Haryana.
On Tuesday, Brent crude, the main international oil benchmark, fell below $70 per barrel for the first time since December 2022. This decline is attributed to concerns that slowing economic growth is reducing fuel demand. The drop in oil prices has improved the profit margins for fuel retailers, particularly state-run companies that control 90% of the market. Consequently, the government instructed the three major state-run retailers—Indian Oil Corporation (IOC), Bharat Petroleum Corporation Ltd (BPCL), and Hindustan Petroleum Corporation Ltd (HPCL)—to lower petrol and diesel prices by Rs 2 per litre on March 14, just before the general election.
Since petrol was decontrolled in 2010 and diesel in 2014, many Indians still face high prices, with petrol exceeding Rs 100 per litre in several states and diesel above Rs 90 per litre. These fuel costs significantly impact inflation due to their extensive use in transportation, cooking, and various industries.
India’s Expectations from OPEC+
India is also seeking increased oil output from OPEC+, the coalition of the Organization of the Petroleum Exporting Countries and its allies led by Russia. The secretary noted that India’s fuel demand is rising, and last week, OPEC+ decided to delay a planned increase in oil output for October and November in response to the price slump.
As the third-largest global oil importer and consumer, India depends on foreign sources for over 87% of its oil needs. Indian companies are focusing on purchasing crude oil from cost-effective suppliers like Russia, which offers discounted rates compared to Middle Eastern grades, even considering longer transit times.
Following the start of the Ukraine conflict in February 2022, Russian oil quickly entered the Indian market as European countries reduced their purchases from Moscow. Russia’s share of India’s crude imports surged from less than 1% before the conflict to 42% in the first five months of this fiscal year, surpassing major suppliers such as Iraq, Saudi Arabia, the UAE, and the US, according to energy cargo tracker Vortexa.
Additionally, the Secretary mentioned that the Indian oil ministry is in discussions with the finance ministry about the crude windfall tax. He noted that if product cracks remain low, there is unlikely to be a windfall tax on refined fuels.