Oil prices surged to a 10-month high, nearing USD 90 per barrel on September 6, 2023, marking a significant milestone for the year. Several factors have converged to drive this upward trajectory. Principally, the decision by Saudi Arabia and Russia to extend voluntary production cuts until year-end has tightened global supply. Concurrently, robust oil demand from China and the United States has exacerbated the price rally.
India, a nation heavily reliant on oil imports, is poised to feel the repercussions of this price surge. As oil prices escalate, so does India’s import bill, exerting pressure on the Indian rupee and potentially triggering higher inflation. Moreover, elevated fuel costs for both consumers and businesses threaten to stifle economic growth, posing challenges for a country striving for recovery.
Considering the mounting oil prices, any immediate relief in the form of reduced fuel prices from the Indian government seems improbable. On the contrary, the government may need to consider raising fuel prices, including revisiting the dual pricing on High-Speed Diesel (HSD), to alleviate the strain on its finances. Such a move, however, could further intensify inflationary pressures and impede the nation’s economic resurgence.
Oil prices hit a 10-month high of nearly $90 per barrel on September 6, 2023, for the first time this year. This is likely to have a negative impact on India, which imports more than 85% of its oil needs. Given the rise in oil prices, it is unlikely that the Indian government will reduce fuel prices in the near future. In fact, the government may have to raise fuel prices to reduce the burden on its finances. This could further add to inflationary pressures and dampen economic growth.
Oil prices near $90, Indian fuel prices unlikely to change
- Oil prices hit a 10-month high of nearly USD 90 per barrel on September 6, 2023, for the first time this year.
- This is due to a number of factors, including the extension of voluntary production cuts by Saudi Arabia and Russia until the end of the year, and strong demand for oil from China and the United States.
- India, which imports more than 85% of its oil needs, is likely to be impacted by the rise in oil prices.
Impact on India
- The rise in oil prices will increase India’s import bill, which could put pressure on the rupee and lead to higher inflation.
- It could also lead to higher fuel prices for consumers and businesses, which could dampen economic growth.
- The Indian government has been subsidizing fuel prices to keep them in check, but this has put a strain on the government’s finances.
Chances of a petrol, diesel price change in India
- Given the rise in oil prices, it is unlikely that the Indian government will reduce fuel prices in the near future.
- In fact, the government may have to raise fuel prices to reduce the burden on its finances.
- This could further add to inflationary pressures and dampen economic growth.
Conclusion
- The rise in oil prices is a negative development for India, which is a net oil importer.
- The government will need to carefully balance the need to keep fuel prices in check with the need to protect its finances.
Indian Fuel Prices, Important points:
- Oil prices hit a 10-month high of nearly USD 90 per barrel on September 6, 2023, for the first time this year.
- This is due to a number of factors, including the extension of voluntary production cuts by Saudi Arabia and Russia until the end of the year, and strong demand for oil from China and the United States.
- India, which imports more than 85% of its oil needs, is likely to be impacted by the rise in oil prices.
- The rise in oil prices will increase India’s import bill, which could put pressure on the rupee and lead to higher inflation.
- It could also lead to higher fuel prices for consumers and businesses, which could dampen economic growth.
- Given the rise in oil prices, it is unlikely that the Indian government will reduce fuel prices in the near future.
- In fact, the government may have to raise fuel prices to reduce the burden on its finances.
- This could further add to inflationary pressures and dampen economic growth.
Bulk/ Direct Delivery under Dual pricing on HSD by Government may rise if HSD barrel rates goes high
The Indian government currently subsidizes HSD prices for certain sectors, such as Infra & Industry. This is known as dual pricing. However, the government may be forced to raise HSD prices for these sectors if the barrel rates of HSD continue to rise. This is because the government cannot afford to subsidize HSD prices indefinitely.
- A rise in HSD prices for certain sectors could have a negative impact on the Indian economy. For example, higher transportation costs could lead to higher prices for goods and services, which could further fuel inflation.
- The Indian government is in a difficult position. It needs to keep fuel prices in check to protect consumers and businesses, but it also needs to protect its finances. The government will need to carefully balance these competing needs in the coming months.
It is interesting to note that the retail rates of petrol at petrol pumps remained unchanged even as international oil prices and the diesel prices sold to bulk users jumped significantly last year.
How to save money on HSD bulk procurement during dual pricing?
Bulk buyers can save themselves money during dual pricing for HSD bulk procurement by procuring diesel from mobile bowsers like Fuel Ent, which is a legal way to deliver HSD at retail price and deliver at doorstep.
- Dual pricing for HSD means that the government charges a higher price for HSD sold to bulk users, such as industries and transportation companies, than the price charged to retail consumers. This is done to subsidize the cost of HSD for retail consumers.
- Mobile bowsers are vehicles that are equipped with tanks to transport and dispense fuel. They are typically used to deliver fuel to remote areas or to customers who do not have access to a fuel station.
Fuel Wings is a company that provides mobile bowser services in India. The company claims to offer diesel at retail price and to deliver it to the customer’s doorstep. This can be a convenient and cost-effective option for bulk buyers during dual pricing for HSD bulk procurement.