Petrol, diesel prices slip as global crude eases

In what could translate into an electoral bonanza for the government, the crashing global crude prices have started to pin down retail petrol and diesel prices in the market.

The international oil prices, which are falling since November, are finally reflecting in the fuel prices after a lag of one-and-a-half month.

On Wednesday, petrol price in Delhi was at a one-year low of Rs 69.79 per litre. Diesel also slipped to Rs 63.83 per litre, marginally above its price at the beginning of the current year. Prices of petrol and diesel have been on the decline since the last six days in Delhi. In Mumbai too, petrol and diesel prices dropped to Rs 75.41 and Rs 66.70 per litre respectively.

And with the overseas crude trending downwards, domestic fuel prices are only expected to slip lower as oil marketing companies (OMCs) pass on their gains to consumers.

Deepak Mahurkar, partner and leader – oil & gas industry – PwC India told DNA Money that retail fuel prices will go down further as oil retailers transfer benefits of lower global prices to end-users.

"(Fuel) retail prices have to go down. They will definitely go down. It usually takes one-and-a-half to three months to cycle the crude purchased in the global market to the retailer in the domestic market. After the crude is purchased in the international market, it is transported and processed in the refineries and then stored in tank. It's a one-and-a-half to three months cycle. We should expect oil companies to pass on the benefits to us in this duration," he said.

Going by Mahurkar's turnover time, the current easing in the domestic fuel prices could be the effect of the drop in global crude in the beginning of November. Last few months have seen global crude falling over 40 per cent from around $86 per barrel in October to $50 per barrel today.

On Wednesday, Brent crude oil futures slipped 22 basis points to $50.36 a barrel, the weakest since August last year.

The PwC energy expert expects the impact of today's low global crude prices to be felt in March, which would be closer to the general elections.

"The government has promised that the crude oil price will reflect in petroleum products. You will see more correction happening over a period of time. Most of the time, elections have seen correction (in fuel prices) happening," he said.

The flipside, though, would be that there could be some loss of excise earnings to the government.

Madan Sabnavis, chief economist, Care Ratings Ltd, also expects the "reprieve" from low global crude to last for 5-6 months.

"We should realise that this bit of good news will remain until April when the ban on Iran will be reviewed. Right now, we got a six-month reprieve, starting from November. In May, we will get a clearer picture. Currently, we are seeing that prices are going down essentially because of high stock with the US, as well as increased supply in global market. The so-called cut of Opec (Organisation of Petroleum Exporters Country) is also not really happening.

So, the crude oil prices are expected to remain at this level or go down further. That's what we could see," he predicted.

Price See-Saw

• On Wednesday, petrol price in Mumbai was recorded at Rs 75.4 per litre
• However, the price of diesel in the city remained stagnant at Rs 66.79 per litre