International crude oil prices fall, but consumers continue to suffer
The international price of crude oil is at its lowest level in the past six months, but Indian consumers are not benefiting as gasoline and diesel are deregulated and public sector oil companies make the final decision on price.
In fact politicians in power have only two things to say when asked about rising fuel prices. First, “it’s due to rising international crude prices” and second, “we don’t have anything in our hands because it’s deregulated.” In the end, ordinary consumers continue to bleed.
The world’s most widely used benchmark crude, Brent, traded at $94.91 a barrel on Thursday after fears of a global recession pushed it down to a six-month low of $91.51 a month. standby.
Oil companies are supposed to revise and make changes to increase or decrease the retail price of gasoline and diesel every morning based on the cost. But they froze rates for a record 137 days starting November 4, 2021, just as states like Uttar Pradesh and Goa went to the polls. This period is considered by oil companies as the “loss period” because the international price of crude has increased during this phase.
Indeed, gasoline was deregulated in June 2010 and diesel in November 2014. Since then, the government no longer pays oil companies any subsidies to compensate them for losses they may incur by selling fuel at lower prices. to costs. In a way, it is totally up to the oil companies to take a call to change gasoline and diesel prices, except when the code of conduct comes into effect at election time.
Shortly after the end of state elections and the end of the ‘freeze’ on March 22 this year, tariffs rose by Rs 10 per liter each in just over a fortnight. Falling international crude oil prices mean fuel retailers such as Indian Oil Corporation are now breaking even on gasoline, but there are some losses on diesel, officials with knowledge of the matter said. Thus, oil companies recoup losses when input costs fall.
In addition, the state-owned fuel retailers IOC, Bharat Petroleum Corporation Ltd (BPCL) and Hindustan Petroleum Corporation Ltd (HPCL) did not exercise their right to adjust the retail price of gasoline and diesel based on international costs for four and a half months now to help the government deal with runaway inflation.
It is a fact that at one time they were losing Rs 20-25 per liter of diesel and Rs 14-18 per liter of petrol as international oil prices soared. These losses have been reduced with the fall in oil prices. “There is no under-recovery (losses) on gasoline now. For diesel, it will take time to reach this level,” an oil official quoted in media said. But it is unlikely that this translates into an immediate rate cut as oil companies will be allowed to recoup losses they have accrued by selling fuel below cost over the past five months, another official said. – Diesel recovery is now reduced to Rs 4-5 per litre.
Moreover, the oil companies did not revise their rates to help the government manage inflation which had already reached a multi-year high. It would have increased further if gasoline and diesel prices had risen in line with costs. It also means that the government exerts influence on the oil companies but does not take any action to reduce prices. Additional taxes and duties add another fuel to the fire and ordinary consumers suffer.
Recently, the United States of America has seen a drop in fuel prices and consumers are rejoicing, but in India the situation remains the same with fuel prices reaching almost a century per litre. It is time for the government to also tell the oil companies to pass on the benefits of lower international crude oil prices to ordinary consumers.