Indians will have to deal with higher oil prices as polling ends and global supply remains curtailed
Petrol and diesel priceswere kept in check for the last two months as campaigning was underway.
- This came amidst a protracted rise in
global oil pricesin the last few months owing to curbs in production by Saudi Arabia and lesser exports from sanction-hit Iran and Venezuela.
- Fuel retailers will be eager to make up for the losses they had to absorb in the last few months, by hiking prices.
- To make matters worse, oil prices will stay high owing to the
OPEC’s decision to maintain supply cuts.
Petrol and diesel prices were kept in check for the last two months as campaigning was underway.
The government instructed state-owned oil marketing companies - which includes Indian Oil, Bharat Petroleum and Hindustan Petroleum - to keep prices stable in April and May so as to keep consumer sentiment upbeat.
Unfortunately for the oil marketers, this request came at the wrong time. In the last few months, global oil prices have been rising owing to curbs in production by Saudi Arabia and lesser exports from sanction-hit Iran and Venezuela.
Now, fuel retailers will be eager to make up for those losses they had to absorb in the last few months, by hiking prices.
Today, the prices of both petrol and diesel were hiked in major cities, by ₹0.10 and ₹0.16, respectively.
More oil trouble
To make matters worse for Indians, the end of elections coincides with continued difficulties in the global oil market.
Under India’s current deregulated system, which involves the daily revision of rates, state-owned fuel retailers fix rates based on international benchmarks like the 15-day average of global prices.
Global oil prices are expected to stay high due to two major reasons. The Trump administration revoked waivers on Iranian imports. Organization of the Petroleum Exporting Countries (OPEC) too has decided to maintain production cuts.
Saudi Energy Minister Khalid al-Falih told reporters that oil inventories would be curtailed “gently”.
Rising tensions in the Middle East between Saudi Arabia and Iran will also make matters worse. Oil prices rose earlier this week after Saudi Arabia accused Iran of attacking its oil tankers.
The increase in oil prices proved to be a huge problem or India last year, leading to a rise in its trade deficit, higher inflation and the depreciation of the Rupee. However, the economy was given a respite as oil prices reduced gradually towards the end of 2018.
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