The prices of petrol and diesel in India have scaled up sharply in fiscal 2020 owing to the rise in the crude prices in the international markets. India mainly depends on oil imports to meet its domestic requirements. A rise in the crude prices in the overseas markets will have a direct impact on the fuel rates in the domestic markets.
The petrol and diesel rates are revised daily at 6:00 am by the state-owned Indian Oil Corporation Limited (IOCL) since June 15, 2017. The prices will be changed in line with the international rates of the respective fuel and currency exchange rate.
In India, the rates of fuel vary between one state to another depending on the incidence of the VAT or local sales tax imposed by several state governments on the oil.
Impact of Coronavirus
The year witnessed the outbreak of coronavirus crisis leading to weak fuel demand across the globe. A series of lockdowns and travel restrictions imposed on the citizens across the world reduced the usage of oil, weighing on its prices to slump.
The oil marketing companies in India had resorted to calibrating the rates since the outbreak of the pandemic cases to avoid volatility in the retail prices. Hence the prices were updated less frequently and prices stayed consistent for months at times.
The oil industry witnessed its worst year during 2020 due to the virus crisis. At one point in April, the fuel prices crashed to zero and traded in negative levels. So, the Organization of the Petroleum Exporting Countries (OPEC) and its member partners stepped in and agreed for deeper output cuts to cushion the ailing oil prices.
Accordingly, the oil producers club reduced the output to the tune of 9.7 million barrels per day (bpd) for May and June to prop up fuel prices. Post OPEC groups move, the prices gradually inched up over a while to touch towards its current rate of around $50 per barrel.
The easing of the lockdown norms and stay-at-home orders in June 2020 across most of the countries worldwide prompted improvement in fuel demand.
The United States of America's Energy Information Administration (EIA) had forecasted the world oil consumption for 2020 to fall by 8.30 million bpd in June 2020, a sharper decline than its earlier expectations of a drop of 8.15 million.
Linda Capuano, Administrator of EIA noted that the "Initial data show the global oil market rebalancing faster than the EIA's previous forecast."
The OPEC's move to go for deeper cuts of 9.7 million bpd, equalled to about 10% of the global supply. The trim was in place through July 2020.
In India, the prices of fuel were kept constant for 85 days between March 17 and June 6. Again, between June 30 until August 15, the petrol price revision was not made for 58 straight days. The diesel rates were unvaried for 48 consecutive days.
The recent news of the vaccine aimed to prevent the coronavirus drove the oil prices in the global markets to rally as optimism for improved fuel demand grew.
Both the U.S. crude benchmarks witnessed a positive growth over the last few days. The crude benchmark - Brent rose by 36.74% from $36.9 per barrel on October 30. Currently, Brent has crossed $50 barrel as on December 12 as it traded at $50.55 per barrel, up by 1.16% as against the previous trade session.
The fuel prices in India have touched a two-year high despite the ongoing pandemic situation. In Mumbai, the financial capital of India, the petrol prices have crossed Rs 90 per litre; diesel rates have gone past Rs 80 per litre respectively.