International oil prices have continued to show extreme volatility, falling one day and rising the next, leading to no reduction in petrol and diesel prices in India despite a drop in input costs, a senior oil ministry official said on Thursday.
Last week, global oil benchmark Brent crude futures fell below USD 70 per barrel for the first time since December 2021 but then rebounded. As of Thursday, Brent was trading at USD 74.58 per barrel, while West Texas Intermediate was at USD 71.71.
"Oil prices continue to be volatile. They fell one day last week to below USD 70 but rose the day after," the official, who requested anonymity, told reporters.
The fluctuating oil prices have renewed hopes for a reduction in petrol and diesel rates, which have been on hold for over two years, barring a pre-election cut earlier this year.
State-owned fuel retailers, including Indian Oil Corporation (IOC), Bharat Petroleum Corporation Ltd (BPCL), and Hindustan Petroleum Corporation Ltd (HPCL), have not adjusted prices in line with cost changes since late 2021. They froze rates in April 2022, briefly cut prices by Rs 2 per litre just before general elections, and then froze rates again. Petrol currently costs Rs 94.72 per litre and diesel Rs 87.62 per litre in the national capital.
When asked about potential price cuts ahead of the Maharashtra assembly elections, the official responded, "It is a good question but I can't say (either way)." Last week, Oil Secretary Pankaj Jain indicated that decisions on reducing fuel prices would depend on sustained lower international oil prices.
Industry sources noted that state-owned fuel retailers are currently making substantial profits on petrol and diesel but are cautious about revising prices due to the volatile nature of global oil markets.
Brokerage Emkay Global Financial Services suggested that IOC, BPCL, and HPCL might reduce prices before the Maharashtra elections, possibly by Rs 2 per litre, but also warned that such a move could be accompanied by an increase in excise duty.
"The 50 bps rate cut is a bold stance by the US Fed to revitalise their subdued economy, which will in turn open the door for other global central banks, including RBI to kick-start the softer interest rate regime," Vijay Bharadia, Founder of Wallfort Financial Services Ltd, said.
IOC, BPCL, and HPCL, which control roughly 90 per cent of India’s fuel market, have not voluntarily adjusted prices for petrol, diesel, and cooking gas (LPG) for the past two years. This freeze began on April 6, 2022, and has continued with intermittent adjustments based on fluctuating global oil prices and domestic economic conditions.
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