Diesel price at all-time high as crude oil surges in international markets
New Delhi: Diesel price rose to an all-time high on Monday as crude oil price continued to advance in global markets, impacting India’s oil import bill and inflation.
Diesel price touched Rs61.74 a litre in Delhi, while petrol hit Rs71.18 a litre, the highest since 1 August 2014, according to information provided by the largest refiner Indian Oil Corp. Ltd.
Price of crude oil surged in global markets as production cuts by Organization of the Petroleum Exporting Countries (Opec) and Russia constrained supplies. Crude oil accounts for about 90% of the production cost of auto fuel.
Indian basket of crude oil has become costlier by 64% since June to $76.26 on Monday, impacting the country’s oil import bill and inflation. According to information available with the commerce ministry, the oil import bill rose 28% in December to Rs66,464 crore from the same time a year ago.
Fuel inflation accelerated to 9.16% in December against 8.82% in the previous month, according to figures released on Monday by the Central Statistics Office (CSO). The surge in fuel price limited the benefit that falling wholesale food prices had on wholesale price index-based inflation, which eased to 3.58% in December from 3.93% in the previous month.
Experts said that oil prices will cool off over the next few months once the current rally loses steam. “Crude oil price may remin firm in world markets for a couple of months. But once shale oil producers from the US ramp up production taking advantage of the viable price levels, supplies will improve, helping prices to stabilize,” said K. Ravichandran, senior vice-president and group head-corporate ratings at ICRA Ltd.
India has been trying to diversify its sources of oil supplies and add renewable sources as well as biofuels into its energy mix to tackle possible price shocks. New Delhi has been playing hard ball with suppliers and letting its state-owned oil firms acquire hydrocarbon assets abroad for energy security.
India is also working on a plan to shift to electric vehicles to reduce fossil fuel consumption and carbon emissions. Consumption of petroleum products, however, has been steadily increasing. In 2016-17, domestic consumption of all refinery products rose to 194.5 million tonnes, up 5.4% from the previous year.
One favourable trend helping to curtail diesel use is the fall in solar power tariff, which makes renewable power generation an attractive proposition compared to costly diesel generation sets.