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Will winter freeze fuel bills

A lot depends on the future of crude prices. If the coming winter is severe, the demand for heating could again push up the demand for petroleum products.

By Rohit Saran | Print Edition: November 2, 2006

How long ago was it when you paid less than Rs 30 for a litre of petrol? Right now, depending on where you live you are paying Rs 47 to Rs 54 for it. A litre of petrol was selling at Rs 29.33 in Delhi till as recently as January 15, 2003. That’s a price hike of about 65%. This when the Government absorbed about half the impact of the 130% spike in global crude prices in the past four years.

But now there are signs that retail price of petrol may come down. By October 3, crude prices had fallen by about 25% from their peak of $75.2 a barrel on August 8. If retail prices haven’t followed suit it is because they hadn’t risen as much as crude prices. Also, the refining and oil distribution companies that cushioned the impact of the spurt in prices must first recover their foregone profits.

A lot depends on the future of crude prices. If the coming winter is severe, the demand for heating could again push up the demand for petroleum products. But most forecasters predict stable crude prices in the next 3-4 months. If that holds, expect cuts in retail prices. That’s good news for the auto sector, where sales have zoomed despite fuel hikes.

Will oil companies be affected? Falling crude prices will fuel profits of downstream companies (HPCL, BPCL, Indian Oil) but upstream companies (ONGC) may remain lacklustre. If you want your pockets to remain warm, hope and pray that it does not get too cold this winter.

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