Owing to the depreciating international crude price, oil companies in India may bring down petrol price by Rs. 2, much to the relief of petrol car owners across the country. The Oil Manufacturing Companies (OMC) can now easily reduce the fuel price considering that the crude price went down to USD 96.5 on every barrel, which is its lowest in the last one year.
In order to discuss the reduction, Indian Oil Corporation (IOC), Hindustan Petroleum Corporation (HPCL) and Bharat Petroleum Corporation (BPCL) will convene on June 15, 2012. Oil companies in the country passed the highest-ever hike of nearly 10 per cent on petrol price to the masses in May 2012. This decision to slash Rs. 2 off the petrol price will be the second successive price reduction, if put into effect.
A senior official with India's largest oil manufacturer confirmed, "There is scope to reduce petrol prices between Rs. 2 and Rs. 3 a litre on falling international crude oil prices but the quantum of cut will be ascertained only after adjusting the rupee's fall against the US dollar."
To better understand, a reduction in product price by 33 paisa follows the decrease of US 1dollar in the international oil prices. However, the price increases by 77 paisa every time the Indian National Rupee falls against the US Dollar. At present, the rupee has come down by 50 paisa against the dollar, while oil prices have gone down by USD 7, on an average. Speaking in terms of rupee, oil price came down from Rs. 5844.36 per barrel to Rs. 5392.88 for each barrel, marking a fall of 7.7 per cent over the last 15 days.
Chairman, BPCL, R.K. Singh, said, "We review petrol prices on a fortnightly basis, which not only depends upon international crude oil prices but also on international product prices and exchange rate fluctuations. It's true that crude oil prices have fallen but at the same time the rupee has also depreciated against the dollar to Rs. 55.79 from Rs. 55.36, when the prices were last reviewed." He further added, “After reviewing global product prices and adjusting for exchange rate fluctuations, we will be happy to pass on the benefit to consumers."
Likewise, B. Mukherjee, Finance Director to HPCL, expressed that the oil companies would have to consider the average of the past two weeks to decide petrol price despite the fact that the cost of crude oil has reduced to USD 96.5. Finance Minister Pranab Mukherjee, too, indicated in the beginning of this week that petrol price may fall.
According to an oil analyst, "A reduction in petrol prices will set the stage for the government to increase diesel prices after the presidential elections gets over as oil firms are losing Rs. 12.5 per litre on sale of diesel, which is an administered product." Since June 1, 2012, oil companies have been accumulating losses worth Rs. 450 crore every day on sales of sensitive petroleum products like diesel, cooking gas and kerosene.
