New Delhi: Diesel prices in India increased to an all-time high on Sunday and petrol prices rose to the highest since September 2013, following a rally in global crude oil prices.
Diesel was sold at Rs65.65 per litre in the national capital on Sunday. Petrol prices registered a peak of Rs74.40 per litre in Delhi, since the record Rs76.06 per litre reached on 14 September 2013.
While the National Democratic Alliance government has ruled out bringing back fuel pricing under government control, India’s worry over crude oil prices stems from its energy needs being primarily met through imports—the country imported 214 million tonnes of crude oil in 2016-17. Extreme volatility has marked crude oil prices, which hit a record $147 per barrel in July 2009.
This comes at a time when the cost of India’s basket of crude, which averaged $47.56 a barrel in 2016-2017, touched $63.80 (average price) in March 2018, according to the Petroleum Planning and Analysis Cell. The Indian basket represents the average of Oman, Dubai and Brent crude.
In June last year, India’s three state-run oil marketing companies—Indian Oil Corp. Ltd (IOCL), Bharat Petroleum Corp. Ltd (BPCL) and Hindustan Petroleum Corp. Ltd (HPCL)—introduced dynamic fuel pricing, joining countries such as the US and Australia, where fuel prices change daily depending on global oil price fluctuations.
Analysts said that crude prices are unlikely to sustain at the current high levels.
“Crude oil prices shot up 24% in the first three months of 2018, and touched a 40-month high in April, owing to continuous decline in global inventories driven by production cuts by the Organization of Petroleum Exporting Countries (Opec) and geopolitical tensions," ratings agency Crisil Ltd wrote in a 19 April report.
“CRISIL Research expects crude prices to average $70 per barrel for calendar 2018, a 27% rise (year-) on-year. Consequently, India’s oil import bill is expected to swell 26% to Rs650,000 crore this fiscal," the report added.
India, the world’s third largest energy consumer, has maintained that it is a price-sensitive customer and will seek reasonable rates as its energy demand grows.
It has been trying to stitch new alliances including exploring a joint front with China, which may include joint sourcing of energy supplies. The US may also collaborate with India on its crude oil reserve programme as part of a strategic energy partnership.
Saudi Arabia has defended the cuts and said that it will not allow a global glut to build up. This assumes significance, given that Opec accounts for around 40% of global production and India is a major Opec consumer.
However, such high prices are also not beneficial to producers.
Fatih Birol, International Energy Agency (IEA) executive director, in an interview said that while significant oil price increase poses a risk to India’s economic growth, it doesn’t bode well for the producers either, as it will create a space for oil alternatives.