Petrol, diesel prices cut

The oil marketing companies (OMCs) on Tuesday decided to reduce the petrol price by 50 paise a litre and diesel price by 46 paise a litre, including state levies with corresponding price revision in other states with effect from midnight of December 15.

This small cut is inspite of a significant fall Indian basket of crude oil fell to $34.39 a barrel as on Monday compared to $41.17 in the last fortnight, signaling that full benefit of falling crude oil prices have not been passed over to the consumers and the government has kept enough room for itself to further increase the excise duty to mop up revenues.

With the price cut, the retail selling price of petrol in Mumbai will be Rs 67.05 a litre and Rs 59.98 a litre in Delhi. Similarly, the retail selling price of diesel in Mumbai will be Rs 53.32 a litre and Rs 46.09 a litre in Delhi.

“The current level of international product prices of Petrol & Diesel and INR-USD exchange rate warrant a decrease in prices, the impact of which is being passed on to the consumers with this price revision. The movement of prices in the international oil market and INR-USD exchange rate shall continue to be monitored closely and developing trends of the market will be reflected in future price changes.,” said an Indian Oil statement, India’s largest fuel retailer.

The international crude oil prices have fallen to seven year low $38 a barrel as the oil producing countries decided not to cut supplies inspite of falling demand. Moody's Investors Service on Tuesday cut its 2016 Brent price assumption by $10 to $43 per barrel and its WTI price forecast by $8 to $40 on expectations of a prolonged supply glut.

The Indian basket of crude oil fell to $34.39 a barrel as on Monday compared to $41.17 in the last fortnight. In Rupee terms, the price of crude oil fell to Rs 2304 compared to price of Rs 2725 a fortnight ago. The price could have gone down further but the depreciating Indian Rupee prevented the fall. The Indian Rupee fell to 67 against the US compared to 66.21 a fortnight ago.

Meanwhile, India's fuel demand rose 6.4 percent in November compared with the same month last year, driven by higher sales of petrol as discounts and festive season buying increased passenger vehicle sales.

Consumption of fuel, a proxy for oil demand, totalled 14.8 million tonnes, data from the Petroleum Planning and Analysis Cell (PPAC) of the petroleum ministry showed.

Interestingly, the rise in India's fuel demand is in contrast with sagging oil consumption in China, the world's second biggest economy. India would be the most important driver of energy demand growth in the world in the years to come, according to International Energy Agency estimates.