New Delhi Oil Minister Hardeep Singh Puri on Wednesday said that there is no proposal at the moment to cut retail prices of petrol and diesel as prices of crude oil are witnessing high volatility due to geopolitical conflicts in two parts of the world.
“We have had no discussions with the oil marketing companies (OMCs) on this. We are in a highly turbulent situation. There are two areas on the global map which are in conflict situations. In the last 7-10 days, we’ve had challenges to shipping. I’m carefully weighing my words. We have had challenges to shipping in one particular area from where 12 per cent global shipping traffic goes, from the Red Sea and the Suez Canal. 4-8 per cent of global LNG cargo went through this area in 2023. At 8.2 million barrels per day (mb/d) of crude oil comes through this,” the Oil Minister said responding to a question on fuel price reduction.
Red Sea impact
Terming reports of price cuts as “speculative”, the Minister said that to deal with such issues, India has diversified its crude oil procurement sources and also crude oil suppliers are taking a different route to avoid disruptions along the Red Sea route.
“If there is a further challenge, or there is a disruption, do you see the kind of impact that can be caused. But in this kind of a situation, the primary responsibility of all the other operators in the ecosystem is to ensure that there is availability. The availability does not come at a slightly enhanced price. The price of crude oil I monitor on a daily basis. One, it had gone up to more than $80 a barrel. Then it came down. But in a highly volatile situation, our primary responsibility is to ensure availability and affordability. I have answered the question the best I can, but I think it’s totally speculative,” Puri emphasised.
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Trade sources said that OPEC+ will aim to keep prices in the $80 per barrel range, which is the fiscal break-even price for Saudi Arabia, the world’s top crude oil exporter.
Sources said that international crude oil prices below $80 per barrel makes it convenient for OMCs to curb retail prices. However, volatility in the markets and the escalating conflict in the Red Sea could stall the exercise.
According to JM Financial’s December 2 report, at spot Brent price and actual product cracks, OMCs’ gross auto-fuel marketing margin has risen to ₹6.4 per litre (vs. historical margin of ₹3.5 a litre) and gross auto-fuel integrated margin has gone up to ₹15.2 per litre (vs. historical margin of ₹11.4).