Crude oil price, which as a matter of daily revision of fuel price at par with international pricing by OMCs, has seen prices of both petrol and diesel hit record highs will just not burn a hole in the pockets of commoners for this set of commodity. But as per a leading daily report, it is suggested that the relief in price brought about by the introduction of GST on over 180 items may now be reversed due to the hike in price of crude oil which is now seen to settle below $80 per barrel.
Why soaring crude price will hit price of commodities other than fuel price?
Crude oil though not directly affects the cost but crude-based raw materials are used for a variety of purposes say petroleum based derivatives are used in packaging material such as tubes and bottles. Also increase in the cost of fuel, increases the transportation cost and the effect is more pronounced in sectors that are heavily dependent on goods transportation.
Also, in order to support the domestic manufacturing industry and farmers, the government increased import duty on crude palm oil as well as refined palm and hence the effect to an extent is likely to be passed on to the end consumers.
So, products across daily staples, detergents, cooking oils, packaging snacks will all see an increase by upto 4-5% as estimated by experts if the crude oil prices continue to hover near current levels over the next quarters.
Interestingly, crude oil related cost comes at between 15-20% for the raw material used in packaging and the increase in palm oil cost due to the rising crude impacts packaged snacks market.
And after reporting a good set of Q4 numbers buoyed by rural demand, decent input cost, focus put to improve operational efficiency and margins, companies across sectors foresee a threat of pressure on the demand side in case the crude oil prices do not stabilize.