The price of Brent crude saw its largest monthly fall since the beginning of the pandemic, in November 2021 from USD 84.4/barrel to USD 70.6/barrel.
Amid worries that the new Omicron variant of COVID-19 believed to be more transmissible than previous strains could cut oil demand as global supply builds, there is a fall in international crude oil prices. If this fear persists it could end up in further lowering of the price of petrol and diesel for consumers in India, as well as in other countries.
The price of Brent crude saw its largest monthly fall since the beginning of the pandemic, in November 2021. The month ended with Brent crude at USD 70.6 per barrel down from USD 84.4 per barrel at the beginning of the month. Currently, Brent crude is trading at around USD 70 per barrel.
The worries regarding fall in oil demand also arise due to the growing concerns that the new variant may have increased ability to evade vaccine immunity leading to the current vaccines being less effective at preventing infection from the Omicron variant in comparison to other variants.
With the US-based vaccine maker Moderna CEO recently saying Omicron may be able to bypass the immunity provided by the COVID-19 vaccines, the price of Brent crude oil tumbled by 16.4%.
In the last one year, crude oil prices doubled from USD 43 per barrel in October 2020 to USD 85.5 per barrel in October 2021. However, there has been some curb in the prices after the announcement of a planned coordinated release of emergency crude oil reserves by the United States, China, Japan, India, South Korea and the United Kingdom.
India announced a release of 5 million barrels of crude oil from its strategic reserves with the UK announcing the release of 1.5 million and the US announcing 50 million barrels of crude oil from strategic reserves
How fall in demand may affect domestic fuel prices
The impact of the crash in crude oil prices will be witnessed in all other commodities in the coming weeks in India.
It will have an impact on the fuel prices in India that have always had a cascading effect on other commodities.
If Brent crude prices remain at current levels, OMCs may begin cutting petrol and diesel prices in line with international prices.
The domestic oil prices are benchmarked to a 15-day rolling average of global prices of petrol and diesel.
Between January and November 2021, the price of petrol in Delhi rose by 32% due to a rise in the price of international crude oil.
OMCs have been slow to cut the price of petrol and diesel during previous falls in crude oil prices as they try to make up for lower margins.
March and April saw sharp volatility in international prices but oil marketing companies held the prices of petrol and diesel nearly constant.
Four states - West Bengal, Assam, Tamil Nadu, Kerala and Union Territory of Pudducherry went to the Assembly polls during March-April.
OMCs had also held the prices of petrol and diesel constant for 83 days from the middle of March 2020 due to the COVID-19 outbreak.
International crude oil prices crashed because of a collapse in demand due to pandemic induced nationwide lockdowns across the world.
Fuel prices in India have been stable since November after the government cut Rs 10 and Rs 5 per litre excise duty on petrol and diesel.
Since then most Indian states have also announced cuts in Value Added Tax (VAT) imposed on petrol and diesel in their respective states.
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