Consumers hoping for cheaper petrol and diesel may have to wait a little longer, with Union Petroleum Minister Hardeep Singh Puri indicating that any reduction in fuel prices will depend on whether international crude oil prices remain low over the next two to three months.
The minister said oil marketing companies (OMCs) are currently processing crude oil purchased during the peak of the West Asia conflict, when global prices were significantly higher. As a result, the recent decline in crude oil prices has not yet translated into lower retail fuel prices.
Price cut depends on sustained decline in crude oil
Speaking to reporters on Thursday, Puri said a discussion on reducing petrol and diesel prices would become relevant only if global crude prices continue to remain at lower levels for a sustained period.
He explained that the crude oil being refined today was largely purchased around two months ago, when prices were elevated due to geopolitical tensions. Since oil companies procure crude well in advance, the impact of lower international prices is reflected only after a delay.
According to the minister, if the current trend of softer crude prices continues for another two to three months, the situation could be reviewed. However, he described any immediate expectation of a fuel price reduction as hypothetical.
Oil companies absorbed massive losses during West Asia conflict
Puri said state-run oil marketing companies collectively incurred losses of Rs 74,781 crore up to June 30 after selling petrol, diesel and LPG below their actual cost during the period of high crude oil prices triggered by the West Asia conflict.
Despite the sharp rise in global crude prices, he said India kept domestic fuel price increases relatively limited compared to several other countries.
The minister noted that while petrol prices increased by nearly 20 per cent in many developed nations and around 35 per cent in neighbouring countries, the increase in India was restricted to about 5.58 per cent during the crisis period.
He also highlighted that fuel supplies remained uninterrupted across more than 1.07 lakh retail fuel outlets between late February and the end of June.
Nayara Energy cuts fuel prices
Private fuel retailer Nayara Energy reduced petrol prices by Rs 5 per litre and diesel prices by Rs 3 per litre across its retail network from July 1, becoming the first major retailer to announce a price cut after international crude prices eased.
However, Puri clarified that Nayara’s decision should not be viewed as a broader trend across the sector. He said the company had earlier raised petrol prices by Rs 5 per litre during the crude price surge and has now effectively rolled back that increase.
In contrast, state-run oil marketing companies had not increased retail fuel prices during the crisis, leaving them with little room for a similar rollback.
Why lower crude prices haven’t reached consumers yet
Global crude oil prices had crossed 110 US dollars per barrel during the Iran-related conflict, significantly increasing procurement costs for Indian refiners.
Prices started easing only in the second half of June after an agreement helped de-escalate the conflict. Since crude oil is generally purchased at least two months before it is refined into petrol and diesel, the fuel currently being supplied is based on earlier, more expensive purchases.
As a result, consumers may have to wait before any sustained decline in international crude oil prices is reflected at fuel stations.