Oil marketing companies (OMCs) on Friday raised the retail price of petrol and diesel after a break of almost two months when auto fuel prices remained static on Covid affected global oil market.
The price of petrol has been increased by 32 paise per litre in the state capital to Rs 83.21. Similarly, retail price of diesel has been increased by 37 paise per litre to Rs 76.28 a litre.
While India has brought both petrol and diesel out from an earlier administrative price regime and their retail prices are revised daily based on global movement product prices, holding the retail price revision for almost two months was surprising. At a time when globally prices change by the hour, in India it could be kept static for such a long period.
Every dollar increase in price of crude results in retail price of petrol and diesel to be increased by upto 40 paisa per litre. This would mean that the fuel prices should be up by at least Rs 1.20 per litre by now.
However, oil companies have kept fuel prices static even when there was a need to revise it downwards last month. That saving prevented OMCs from increasing petrol and diesel prices by a higher margin. Now that option is exhausted and regular price revision could restart.
With the price revision, the retail price of the two auto fuel has also increased across the country but the level of increase is different in different cities due to variable taxation structure pursued by the states.
The increase in petrol and diesel prices was expected as global oil market had shown signs of firming up after positive news on successful introduction of a coronavirus vaccine soon. Moreover, the demand for oil and falling inventory levels in major consuming markets has also firmed up crude price.
The benchmark Brent crude price is hovering over $44 a barrel for some time now while the US WTI crude is also close to $42 a barrel. The two have remained firm since the beginning of the month after remaining soft in most parts of October at close to $40 a barrel or less.
The OMC sources said that auto fuel hike on Friday may not be one-off exercise and the price of the two petroleum products may increase gradually over the next week as well. This is required to keep OMCs from incurring losses on the sale of petrol and diesel.