NEW DELHI: Oil Marketing Companies (OMCs) may consider reducing petrol and diesel prices domestically if international crude prices remain low for an extended period, according to a senior official from the Petroleum Ministry.
Pankaj Jain, Secretary at the Ministry of Petroleum and Natural Gas, also mentioned that he is discussing the possibility of withdrawing the windfall tax on crude oil exports with the Finance Ministry. Jain noted that if the product cracks (the difference between the price of crude oil and refined products) remain low, there might be no need for windfall taxes on refined fuels.
Regarding potential reductions in petrol and diesel prices, Jain stated that oil companies would consider lowering fuel prices if crude oil prices remain low for a sustained period.
“OMCs will contemplate a cut in retail prices if international crude oil prices stay subdued for an extended duration. In the past 7-10 days, crude oil prices have decreased. Currently, the Ministry is analysing these prices and evaluating how long they will stay low. It would be premature to adjust retail prices based on developments over just one week. We need more time to analyse this trend,” Jain explained.
For the first time since December 2021, Brent crude traded below $70 a barrel for two consecutive days, following OPEC+’s downward revision of its demand forecast. However, prices rebounded on Thursday, with Brent crude futures trading at $71.51 a barrel and US West Texas Intermediate (WTI) crude at $68.37 at 15:16 PM Indian Standard Time.
This decline in oil prices has improved profitability for OMCs, which may pass on the benefit to consumers through a price cut. The companies revised petrol and diesel prices across the country in March 2024, reducing them by Rs 2 per litre. Additionally, Indian oil marketing companies, including Indian Oil Corporation Ltd (IOCL), Bharat Petroleum Corporation Ltd (BPCL), and Hindustan Petroleum Corporation Ltd (HPCL), have reported significant profits in recent quarters, with a combined consolidated net profit of Rs 7,371 crore in the first quarter of this fiscal year.
Jain also urged OPEC+ to increase production, given India’s growing demand. Last week, OPEC+ agreed to delay a planned oil output increase for October and November. “OPEC has said that they will decide on this by December 2024. We want production to rise due to our growing demand. If production increases, we will welcome it,” said Jain.
When asked if India would consider purchasing more oil from Russia, Jain responded that refiners would buy oil from suppliers offering the best rates.