Prices of petroleum products like petrol and diesel are likely to go up by up to ₹5 a litre each over the course of the next few days as international crude oil prices shot up after the drone attack on Saudi Aramco’s facility at Abqaiq. Benchmark Brent crude prices were up by over $6 at $67 a barrel on Monday, which is a jump of over 10%, and could rise further.
Oil marketing companies (OMCs) will have to increase the retail product prices in a fortnight.
Besides, the sharp jump in global crude prices may also put pressure on refining margins amid slowing demand, increasing the OMCs’ prospects of making losses.
“We do not rule out the possibility of moderation in marketing margins on auto fuels — a $10/per barrel rise in global crude and product prices may require OMCs to increase retail price of diesel and gasoline by ₹5-6/litre in the following fortnight,” said Kotak Securities in a research note to its clients.
Following the drone attack on its oil processing facility at Abqaiq, Saudi Aramco has cut down its oil production by 5.7 million barrels per day (mbpd).
This has reduced global oil supply by 6%, which is huge. However, this will not result in a physical shortage of oil for India.
The real impact for India will be the rise in prices.
“The $6-7 per barrel increase in oil prices has an immediate impact on India. Based on past experience, if the price of oil crosses $70-75 per barrel, the government may start thinking of bringing back the administered pricing mechanism,” Amit Bhandari, fellow for energy and environment at Gateway House, an Indian think tank on foreign policy, told The Hindu.
Meanwhile, an Air India official said a 10% rise in the cost of aviation turbine fuel adds ₹50 crore to its monthly fuel bill.
He added that while there would be no immediate effect, if the situation persisted, all airlines would be forced to raise fares.