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Petrol, diesel prices in India to shoot up as crude crosses $115 per barrel amid Russia-Ukraine crisis

New Delhi: The Russia-Ukraine crisis-led global hike in crude oil prices is expected to push India’s domestic prices of petrol and diesel by Rs 20-22 per litre.

However, an excise duty cut may dampen the impact on petrol and diesel prices to an extent, but not entirely.

The crisis as well as fears of lower supplies have pushed Brent crude oil price to $ 115 nearly an 8-year high on Thursday.

Besides, robust global demand is expected to keep the Brent index crude oil price high.

Consequently, crude oil prices have surged by nearly 15 per cent in the last two days on fear of tight supplies.

It had risen to $111 per barrel on Wednesday from Tuesday’s $102 per barrel mark.

At present, Russia is the third largest producer of crude oil in the world.

It is feared that sanctions against Russia will curtail global supplies and stifle growth.

On the other hand, India is a major crude oil importer in the world, and for it, the price range is a cause of concern as it may add Rs 20 to Rs 22 in petrol and diesel selling prices, if the OMCs decide to revise the current prices.

Lately, petrol and diesel prices have been largely stable over the past 3 months.

In January 2022, oil prices averaged at $85.5 per barrel. During that month, petrol and diesel prices in Delhi were at Rs 95.4 per litre and Rs 86.7 per litre, respectively.

Despite the increase in oil prices in February, petrol and diesel prices have been stable to keep inflation under check.

Bhanu Patni, Senior Analyst, India Ratings and Research, said: “The increase in crude prices is expected to lead to a higher increase in the retail prices as the prices on the retail side have not seen a commensurate increase.”

Furthermore, the cascading effect of higher fuel cost will trigger a general inflationary trend.

Already, India’s main inflation gauge — Consumer Price Index (CPI) — which denotes retail inflation, has crossed the target range of the Reserve Bank of India in January.

In terms of industry calculations, a 10 per cent rise in crude oil prices adds nearly about 10 basis points in CPI inflation.

Aditi Nayar, Chief Economist, ICRA, said: “If the GoI roll back excise duty on petrol and diesel to the pre-pandemic level, a portion of the required rise in pump prices can be offset, albeit at a fiscal cost of Rs 92,000 crore.”

Last week, the Centre said it is open to support initiatives for releases from Strategic Petroleum Reserves to mitigate market volatility and calming the rise in crude oil prices.

India has built strategic petroleum reserves with a capacity to hold 5.33 million metric tonnes (MMT) or 38 million barrels of crude at three locations — Visakhapatnam, Mangaluru and Padur (TN).

In 2021, India had decided to join the global alliance of major oil consuming countries by agreeing to release oil from its strategic oil reserve to address the supply constraint that has kept crude prices high.

(With agency inputs)