The basket of crude oil India buys rose to USD 117.39 per barrel on March 3, the highest since 2012, according to information from the Petroleum Planning and Analysis Cell (PPAC) of the oil ministry.
Highlights
- Petrol, diesel prices need to be increased by over Rs 12 per litre for fuel retailer to break even
- The basket of crude oil India buys rose to USD 117.39 per barrel
- International crude oil prices shot above USD 120 a barrel for the first time in nine years
With international crude oil prices shooting above USD 120 a barrel, petrol and diesel prices in India, which have been on a freeze for the past four months in view of assembly elections in states like Uttar Pradesh, need to be increased by over Rs 12 per litre by March 16 for fuel retailers to break even. International crude oil prices shot above USD 120 a barrel for the first time in nine years on Thursday before retreating a little to USD 111 on Friday, but the gulf between cost and retail rates has only widened.
With international oil prices - on which domestic fuel retails are directly benchmarked - spiking in the last two months, state-owned fuel retailers "need a massive price hike of Rs 12.1 per litre on or before March 16, 2022, just to breakeven and a price hike of Rs 15.1 is required" after including margins for oil firms, ICICI Securities said in a report.
The basket of crude oil India buys rose to USD 117.39 per barrel on March 3, the highest since 2012, according to information from the Petroleum Planning and Analysis Cell (PPAC) of the oil ministry. This compares to an average of USD 81.5 per barrel price of the Indian basket of crude oil at the time of freezing of petrol and diesel prices in early November last year.
Price of LPG cylinders expected to shoot up
Along with petrol and diesel, the prices of liquid petroleum gas (LPG) will also expected to increase. In the coming days, soon after the elections, people can expect the impact of inflation on prices of LPG cylinders. The increasing international crude oil prices are also one of the reasons why prices of LPG cylinders will shoot up.
In view of continuous losses, oil companies can increase the prices of domestic LPG gas after the assembly elections in 5 states, Uttar Pradesh, Punjab, Goa, Manipur and Uttarakhand. The public sector oil companies have increased the prices of LPG, and the prices of commercial gas cylinders have increased by Rs 105.
"With state elections getting over next week, we expect daily fuel price hikes to restart across both gasoline and diesel," JP Morgan said in a report.
The seventh and final phase of polling for the Uttar Pradesh legislative assembly is on March 7 and the counting of votes is slated for March 10.
Before these tax reductions, petrol price had touched an all-time high of Rs 110.04 a litre and diesel came for Rs 98.42. These rates corresponded to Brent soaring to a peak of USD 86.40 per barrel on October 26, 2021. Brent was USD 82.74 on November 5, 2021, before it started to fall and touched USD 68.87 a barrel in December.
(With PTI Inputs)
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