Sinking oil prices set to cool down petrol, diesel cost further

Prices of petrol, diesel, LPG and jet fuel are headed downhill as international prices of oil fell to a 12-year low on Thursday with the Indian basket of crude imports coming down to $31.33 per barrel.

Oil prices have fallen by around 70 per cent since mid-2014 bringing relief to the middle class and easing the current account deficit as imports account for 80 per cent of the total crude requirement of Indian refineries.

An Indian Oil official said that prices have come down in the international market as the slowdown in the Chinese economy has reduced demand and there has been a build-up of stocks in the US and Europe. "Inventories in the west are close to an all-time high," he added. High-quality Brent crude declined more than five per cent to a low of $32.16 per barrel on Thursday for the first time since April 2004 and then settled at $33.07 later in the day. US crude futures hit a low of $32.10, their lowest since late 2003, before recovering a wee bit to $32.72.

Market experts see the price of crude tumbling further. As part of the fortnightly revision undertaken by public sector oil companies, the price of petrol was on January 1 cut by 63 paise per litre while that of diesel was lowered by Rs 1.06 a litre on the back of a softening global oil market.

Petrol now costs Rs 59.35 per litre in Delhi while diesel is priced at Rs 45.03. These prices are expected to come down further when the next revision takes place on January 15. The decline in crude prices will lead to lower LPG prices for those who have to buy cooking gas at the market price.

The government's subsidy bill on LPG will also come down due to the lower price. Indian Oil Corporation, Bharat Petroleum Corporation and Hindustan Petroleum Corporation review petrol and diesel prices every fortnight based on average import cost and rupee-dollar exchange rate in the previous two weeks. The exchange rate of the rupee has been hovering in the 66-67 range vis-a-vis the dollar and no major fluctuations are expected to take place as the current account deficit has also come down.

(In association with Mail Today Bureau)