NEW DELHI: Fuel prices have started crawling up after holding steady for two months as international oil markets rebounded in anticipation of an early recovery in demand following news of a third successful Covid vaccine candidate.
International benchmark Brent on Tuesday hit $46.56 per barrel, the highest in eight months, before closing at $46.40. US benchmark WTI (West Texas Intermediate) too rose to $43.43 a barrel. These are the levels last seen before Saudi Arabia started the price war at the beginning of March.
Crude has been inching up since November and jumped above $40-mark on November 4. Since then, it has been rising steadily as news of vaccines developed by Pfizer, AstraZeneca-Oxford University and Moderna showing above 90% success rates buoyed the market.
Since November 20, state-run fuel retailers began raising pump prices from as the impact of costlier crude reflected in their 15-day rolling average price calculations. Petrol has since become costlier by 53 paise a litre and diesel 95 paise in Delhi. The degree of increase varies in other states due to the impact of prevalent VAT rate. The retailers had held the price of petrol since September 22 and diesel since October 2.
Fuel prices will be northbound in the coming few days if crude does not rise further, held down by the shadow of lockdowns and new waves of Covid infections. But if prices rise, it would be bad news for consumers as well as the government. Both are stretched for cash as they struggle with the pandemic’s economic downside.
Costlier crude will jack up India’s oil import bill, shrinking the financial headroom the government enjoyed from the protracted spell of the subdued oil market that followed the historic oil price crash in April.
For example, the oil import bill stood at Rs 93,466 crore in the April-July period, or the first four months of the current financial year. This is 62% lower than Rs 2.51 lakh crore in the comparative period of 2019. In dollar terms, the bill stood at $12.4 billion, marking a saving of 65.7%.
To put the figure in perspective, the near-Rs 1.6 lakh crore saving in the January-July oil import bill is the same as the Rs 1.7 lakh crore tab for the Covid relief package announced for the poor in March. Surely, the government does not buy oil. But cheaper oil has a positive impact on macroeconomic parameters, which reduces drag on government finances and frees up resources for welfare.
Source:-timesofindia.indiatimes.com