With oil prices at lowest since January, will consumer benefit?

With oil prices hitting the lowest point since January this year, the question that industry watchers are now asking is: Will petrol pump rates in India fall? A reduction in cost spells profits for the sellers, and with elections coming up in Haryana and Maharashtra a cut in prices for the consumer could be expected.

India’s crude purchase price is dictated by Benchmark Brent crude, which touched $73.58 on Wednesday. The low point, after a 5 per cent fall the day before, was mostly an outcome of possible oversupply of oil owing to Libya’s return as a seller in the global market, besides consistent output from suppliers beyond the regular OPEC+ group. A global concern has also the recent slump in demand from China.

In India, the situation has created the scope for positive retail margins, especially for the government-managed companies such as Indian Oil, Hindustan Petroleum and Bharat Petroleum, which supply oil to nearly 90 per cent of consumers. Not surprisingly, prices of diesel and petrol were slashed by Rs 2 per litre in March, ahead of the general elections. The March price cut was the first since May 2022 at the petrol pumps.

“Even as the entire world suffered 40-70 per cent fuel inflation during last 3 years, this spirit of Indian Oil kept Indian citizens insulated from soaring global fuel prices, as PM @narendramodi Ji didn’t want our citizens, specially the vulnerable ones, to suffer from crises of fuel availability, affordability and sustainability,” said an X post by Oil Minister Hardeep Singh Puri.

Globally, talk of volatility in prices has led to analysts speculating there could be an undersupply of oil. According to Goldman Sachs, prices could be in the range of $70-85 a barrel. In India, the Modi government won’t face a steep challenge even if prices hit $85.