A drop in international crude oil prices over concerns over the Omicron variant of the virus that causes Covid-19 could, if it persists, end up driving down the price of gasoline and diesel for consumers in India, as well. than in other countries. Indian express examines recent developments in crude oil prices and their potential impact on domestic fuel prices.
How much have crude oil prices fallen?
The price of Brent crude saw its biggest monthly decline since the pandemic began in November, ending the month at $ 70.6 per barrel from $ 84.4 per barrel at the start of the month. Concerns that current vaccines may not be as effective in preventing infection with the Omicron variant as they have been with other variants have raised concerns about the demand for oil. Brent crude is currently trading at around $ 70 a barrel.
The announcement of a planned coordinated release emergency crude oil reserves from the United States, China, Japan, India, South Korea and the United Kingdom also helped curb a year-long rise in oil prices crude, which nearly doubled to $ 85.5 per barrel in October, from $ 43 per barrel in October. October 2020. The United States announced late last month that it would release 50 million barrels of crude oil from strategic reserves as part of efforts to curb rising crude oil prices.
India announced the release of 5 million barrels of crude oil from strategic reserves, while the UK announced the release of 1.5 million barrels of crude oil.
How will the fall affect domestic fuel prices?
If Brent crude prices remain at current levels, petroleum marketing companies (OMCs) will likely begin to reduce gasoline and diesel prices in line with international prices for petroleum products. The impact of changes in crude oil prices is often seen with a lag, as domestic prices are compared to a 15-day moving average of global gasoline and diesel prices. However, oil marketing companies have not strictly followed global benchmarks since the start of the pandemic and have sometimes held prices constant during times of volatility.
In previous declines in crude oil prices, OMCs have been slow to reduce the price of gasoline and diesel as they attempt to compensate for lower margins during periods when they have held domestic prices constant for a period of time. rising world prices. Oil marketing companies had kept gasoline and diesel prices nearly constant despite high international price volatility in March and April, as a number of states headed for elections.
MOCs had also kept gasoline and diesel prices constant for 83 days, starting in mid-March 2020, and international prices collapsed in response to a collapse in demand due to the Covid-pandemic. 19.
MOC has also kept the price of gasoline and diesel stable since early November, when the Center announced a reduction of Rs 10 per liter in excise duty on diesel and a reduction of Rs 5 per liter in duty on diesel. excise duties on gasoline. Most states have also announced reductions in the value added tax (VAT) imposed on gasoline and diesel. The Center still has not reduced central taxes to pre-Covid levels, as it had increased excise duties on gasoline by Rs 13 per liter and on diesel by Rs 16 per liter in 2020 to consolidate income while economic activity declined sharply.
Despite the reduction in central and national taxes, current gasoline and diesel prices are still significantly higher than they were before 2021. Gasoline currently sells for Rs 110 per liter in Mumbai, up by 21.7% since the start of the year. while diesel sells for Rs 94.1 per liter, up 17% over the same period.
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