Are You Getting the Benefit of the Oil Crash?
It does not seem that Indian consumers get the full benefit of the oil crash. Domestic rates of diesel and petrol have fallen 7-11% since early October, even as international fuel prices, which determine retail prices in India, are down by a quarter.
Crude oil prices have fallen 32% from the peak of $86.70 a barrel on October 3 to below $60 last week, with global oversupply following Washington’s decision to exempt big buyers of Iranian oil from sanctions and increased production by the US, Russia and Saudi Arabia amid dwindling demand prospects. The Singapore benchmarks for petrol and diesel have fallen 26% and 25%, respectively, in this period.
Oil companies determine the so called gate prices — at which a refiner sells to fuel retailers — by factoring in international rates of a fuels for the trailing fortnight, the prevailing exchange rate plus freight, insurance and some other charges.
To this are added central and state taxes, as well as dealers’ commission, to make the final retail price, which is published daily.
A senior Indian Oil Corp executive said the price fall has globally contracted margins for fuel, mainly petrol, which is now selling for as low as the price of dirty fuel oil, which often sells cheaper than crude oil.