Crude at 10-month low: People expect cheaper petrol, diesel

- The days of high crude prices are over but it is uncertain when the burden on consumers will ease

- Govt not giving relief to local consumers of cheap Russian crude: Imported 9.5 lakh barrels of Russian crude per day in October

- Oil marketing companies posted a loss of Rs 21,228 crore due to local cheap crude and retail pricing mechanism.

AHMEDABAD: Despite the continuous decline in crude oil prices in the international market, there has been no reduction in the prices of petrol and diesel and due to this, the burden of inflation is falling on the Indian consumers. In June 2022, the average price of crude oil purchased from Indian companies was $116.01 per barrel, while currently crude oil is being purchased at $89.57 per barrel. Consumers are buying petrol and diesel at April 2022 prices and are bearing the brunt, even though crude oil is getting cheaper by around 23 per cent.

Currently, oil marketing companies in India are buying crude oil at a price of $89.57. Not only this price is at the lowest level since February 2022 i.e. in 10 months, but the record high price was in June 2022 at 116.01 per barrel. At the time of high prices, local oil marketing companies used to raise the retail prices using the excuse of global prices. There is also a talk that the price of petrol and diesel in India is free from government control, but at present neither the petroleum company nor the government is giving cheap crude oil prices to the consumers.

Finally, the price of crude oil was unchanged from $102.97 per barrel when the government hiked petrol prices in April. Due to the continuous increase between March 22 and April 6, a total increase of Rs.9.20 per liter was passed on to the consumers, but there has been no change since then.

Not even the benefit of cheap Russian crude

After the war between Russia and Ukraine, Moscow cannot sell crude oil to every country in the world because of the embargo by the US and Western countries. India ranks third in crude oil consumption in the world with imports accounting for 80 percent of its total requirement. Due to the friendship between Russia and India, Russia has started selling cheap crude oil to India at a discount of 20% to 30% from the global price. As of October, India is importing 23 percent of its total imports or 9.5 lakh barrels of crude oil per day from Russia. Indian consumers are also not getting the benefit of cheap prices in the world market, discount of Russian crude on top.

Cheap domestic crude is also excluded from the price calculation

In the international crude oil prices set by the Government of India, Brent crude accounts for 72 percent and Dubai Oman grade for the remaining 28 percent. India produces 20 to 25 percent of its requirements domestically, but domestic crude is not counted in determining the prices of refined products - particularly petrol, diesel, cooking gas or aviation turbine fuel.

According to government statistics, in 2019-20, the price of Indian basket of crude oil was $60.47 per barrel, but ONGC's domestic crude production cost was only $39.2 per barrel. In the year 2020-21, when the price of the Indian basket fell to an average of $44.82, ONGC's crude price also fell to $31.93. In 2019-20, Indian crude was cheaper by 35% and the next year by 28.75%, but the people of India did not get the benefit of its soft price. This information was given by the Ministry of Petroleum in response to a question in the Lok Sabha.

Huge loss of oil marketing companies

Chopped oil marketing companies are incurring huge losses due to petroleum ministry's domestic price fixing formula. India determines the local price based on the prices of British and Omani crude in the domestic market, while the domestic price is calculated as the retail price of petrol and diesel in Singapore. 20 percent local crude production and cheap Russian crude are not counted in determining this price. In the July to September quarter, India's three state-owned oil marketing companies posted a loss of Rs 21,228 crore.