New Delhi: India’s three government-run oil marketing companies (OMCs)—Indian Oil Corp. Ltd (IOCL), Bharat Petroleum Corp. Ltd (BPCL), and Hindustan Petroleum Corp. Ltd (HPCL)— on Sunday reduced the prices of non-subsidized domestic cooking gas across the country.
The price cut on Wednesday, for the four metropolitan cities, ranged from ₹53 to ₹56.5 for a 14.2 kg non-subsidized liquefied petroleum gas(LPG) cylinder and comes in the backdrop of global energy prices on a downward spiral in the backdrop of coronavirus outbreak.
According to information available on Indian Oil Corporation’s website, an LPG cylinder was available for ₹805.50 in Delhi. In Kolkata, LPG cylinder prices were priced at ₹839.50, in Mumbai at ₹776.50 and in Chennai at ₹826.
Analysts are expecting a perfect storm in the energy markets that will help major consumers such as India manage inflationary and fiscal pressures.
The Sunday LPG price cut follows the substantial increase in LPG prices last month. Fuel retailers revise prices of LPG cylinders on the first day of every month, but the price is primarily dependent on the international benchmark rate of LPG and the exchange rate of US dollar and rupee.
The outbreak of coronavirus in China has forced energy firms there to suspend delivery contracts and reduce output. This has impacted both global oil prices and shipping rates, with the Paris-based International Energy Agency (IEA) and the Organization of the Petroleum Exporting Countries (Opec) cutting global oil demand growth outlook. Trade tensions and a slowing global economy also have an overhang on energy markets.
“For now, what we know for sure is that the month of February will record the worst oil demand contraction since the Great Recession. We also know that global aviation will be hit very hard across Asia and take months to get back in shape," Claudio Galimberti, head of demand, refining and agriculture analytics, S&P Global Platts said in a statement.
According to the WHO, there are now 4,351 cases in 49 countries other than China and 67 deaths. South Korea has become the new battleground, having reported a surge in cases - the most outside China.
India is the world’s third-largest oil importer and the fourth-largest buyer of liquefied natural gas (LNG). Every dollar drop in the price of oil decreases the import bill by Rs10,700 crore on an annualized basis. India spent $111.9 billion on oil imports in 2018-19 and is a key Asian refining hub, with an installed capacity of more than 249.4 million tonnes per annum (mtpa) through 23 refineries.
The cost of the Indian basket of crude, which averaged $56.43 and $69.88 per barrel in FY18 and FY19, respectively, averaged $65.52 in December 2019, according to data from the Petroleum Planning and Analysis Cell. The price was $51.16 a barrel on 27 February. The Indian basket represents the average of Oman, Dubai and Brent crude.
Meanwhile, Indian firms are on a hunt for bargains on diverted cargoes of crude oil and liquefied natural gas, with Chinese energy majors declaring force majeure to avoid taking delivery of some cargoes, Mint reported earlier.
Lower crude prices bring good tidings to the government’s exchequer amid a revenue shortfall and a burgeoning fiscal deficit. A fall in global prices will positively impact India’s oil import bill and its trade deficit. A lower import bill could further help bridge the current account deficit.
Mint reported on 16 February about the sluggish Indian economy and industries that are heavily dependent on crude oil such as aviation, shipping, road and rail transportation likely to gain from a sudden drop in crude oil prices due to the coronavirus epidemic in China, the world’s biggest oil importer.
However, there are growth concerns triggering worries about another recession of the likes of 2008.