Petrol pumps are about to face their biggest test, and no, it’s not angry customers
Rising motor oil prices have thrown up a unique problem not foreseen by those who designed the dispensing units (DUs) for petrol pumps. If motor oil prices cross the Rs 100 mark, DUs at petrol pumps will run out of digits. The fuel dispensing units at petrol bunks have been calibrated for digital display of prices in two digits with two decimal figures and can display a maximum price of Rs 99.99. With this, if the price of the fuel touches Rs 100.00, the DUs will display Rs 0.00 and the vendor will have to collect the additional Rs 100 from consumer manually. With motor oil price crossing the Rs 90 mark (petrol is selling in Mumbai at Rs 92 a litre), the Rs 100 mark is well within sight as no respite is seen in the rising global prices of crude oil. “When the DUs were digitized they didn’t foresee the day the price per liter petrol would touch Rs 100 and they have woken up to the reality at the last minute. The dealers and consumers will suffer because it takes time to upgrade the system and the retail industry may even come to a standstill,” M Prabhakar Reddy, chairman of All-India Petroleum Dealers Association told TOI. The oil companies are preparing for the tricky scenario reminiscent of the way software companies readied to face the threat of Y2K bug at the beginning of this century. Oil companies are upgrading their fuel dispensers to ensure they display correct prices when rates reach Rs 100 per litre. According to a recent ET report, most pumps do not need upgradation but some have old dispensers that can only display prices in two digits before the decimal point, which would make them obsolete if petrol price hits Rs 100. Citing executives at state-run and private fuel retailing companies, the report said while most dispensers are equipped to display three-digit prices for a litre of petrol or diesel, a small segment of older pumps in rural areas or smaller towns would need to be upgraded. Less than a fifth of dispensers used by the Indian Oil Corporation, the country’s largest fuel retailer, would need re-calibration to show prices in three digits, the report said citing the executives. The company’s dispensers are set to be upgraded over the next month or so, which would address the issue of price display as well, an IOC executive told ET. The upgrade, he said, was part of the regular operational exercise and not being done in anticipation of higher prices.
IGL hikes CNG, PNG prices; rise in subsidised LPG price too
State-run Indraprastha Gas Ltd (IGL) has raised the price of compressed natural gas (CNG) by Rs 1.70 per kg and of domestic piped gas by Rs 1.30 per standard cubic metres (scm) in Delhi, effective Monday, following a change in the rate of domestic natural gas prices payable to producers. As part of the six-monthly official revision of rates, the domestic natural gas price will go up from October 1 to $3.36 per million British thermal unit (mbtu), from the current $3.06. IGL has also raised the price of CNG by Rs 1.95 per kg in Noida, Greater Noida and Ghaziabad. “The new consumer price of Rs 44.30 per kg in Delhi and Rs 51.25 per kg in Noida, Greater Noida and Ghaziabad would be effective from midnight of September 30 and October 1,” an IGL release said. “The price of CNG being supplied in Rewari is being increased by Rs 1.80 per kg from Rs 52.25 per kg to Rs 54.05 per kg. The price of piped natural gas (PNG) to households in Noida, Greater Noida and Ghaziabad have also been raised by Rs 1.50 per scm. “The revision in retail prices of CNG and domestic PNG has been effected after taking into account the overall impact on the cost, as a result of the increase in prices of domestically produced natural gas notified by the government and appreciation of the dollar as compared to rupee since the last price revision,” it added. State-run oil marketer, Indian Oil Corporation (IOC), on Sunday also announced a marginal increase of Rs 2.89 per cylinder in the price of subsidised LPG cylinder for domestic customers in Delhi for October. “While the price of non-subsidised LPG at Delhi will increase by Rs 59.00 per cylinder in October 2018 mainly due to change in international price and foreign exchange fluctuations, the actual impact on subsidised domestic LPG customers is only Rs 2.89 per cylinder, which is mainly due to GST,” IOC said.
Exxon-led Russian consortium to pay Rosneft $230m to settle production dispute
Russia’s Sakhalin-1 consortium, led by ExxonMobil, has agreed to pay Russian energy giant Rosneft $230 million in an out-of-court settlement of an oil production dispute, an executive of an Indian consortium partner said on Friday. Rosneft had filed a $1.4 billion lawsuit in the Sakhalin district arbitration court in Russia’s far east, accusing the consortium of unjust enrichment, an allegation the consortium denied. The dispute centred around how oil should be shared between the Sakhalin-1 concession and an adjacent Rosneft field. “Rosneft was demanding that it should be paid $1.4 billion … We have agreed for an out-of-court settlement and will be paying $230 million as Rosneft entered the other area in 2011,” N.K. Verma, managing director of India’s ONGC Videsh, a partner in the Sakhalin-1 consortium, told Reuters. Rosneft, which also has a stake in the Sakhalin-1 consortium, declined to comment. ExxonMobil in Moscow declined immediate comment. “We don’t have anything we can share,” said Suann Guthrie, an ExxonMobil spokeswoman in the United States. P.K. Rao, director for operations at ONGC Videsh, said the out-of-court settlement was reached about 10 days ago. The row was over oil “cross-flows” from Northern Chayvo oilfield, controlled by Rosneft. Sakhalin-1, off Russia’s Pacific Ocean coast, is operated by Exxon Neftegaz Ltd, through which ExxonMobil owns 30 percent in the project. Rosneft and ONGC control 20 percent each. Japanese consortium Sodeco owns 30 percent. ONGC’s Verma said production at Sakhalin-1 reached 250,000 barrels per day (bpd), up from some 200,000 bpd, as Russia had lifted output restrictions as part of a global deal with OPEC. Russia’s total oil production hit a post-Soviet high of 11.347 million barrels per day this month. The dispute between Rosneft and the Sakhalin-1 consortium unfolded against the background of a wider rift between Russia and the United States over what Washington called Moscow’s meddling in a 2016 presidential election. Exxon had to quit some joint projects with Rosneft, including developing Arctic oil and gas, over sanctions imposed on Russia by the United States. Participation in Sakhalin-1 is not punishable by sanctions.
Oil at $100 to do more harm than good to global growth; India among losers
Rising oil prices are prompting forecasts of a return to $100 a barrel for the first time since 2014, creating both winners and losers in the world economy. Exporters of the fuel would enjoy bumper returns, giving a fillip to companies and government coffers. By contrast, consuming nations would bear the cost at the pump, potentially fanning inflation and hurting demand. The good news is that Bloomberg Economics found that oil at $100 would mean less for global growth in 2018 than it did after the 2011 spike. That’s partly because economies are less reliant on energy and because the shale revolution cushioning the US. Ultimately, much depends on why prices are pushing higher. A shock amid constrained supply is a negative, but one due to robust demand just reflects solid growth. Both forces are now in play, driving Brent crude up about 22 per cent this year. 1) What does it mean for global growth? Higher oil prices would hurt household incomes and consumer spending, but the impact would vary. Europe is vulnerable given that many of the region’s countries are oil importers. China is the world’s biggest importer of oil and could expect an uptick in inflation. There are also seasonal effects to consider, with winter looming in the Northern hemisphere. Consumers can switch energy sources to keep costs down, such as biofuels or natural gas, although not quickly. Indonesia already has instituted measures to push more use of biofuels and limit the economy’s reliance on imported fuel. For a sustained hit to global growth, economists say oil would need to hold above $100. The dollar’s gain of this year doesn’t help though given crude is priced in greenbacks. 2) How can the world economy absorb oil at $100? Bloomberg Economics found that $100 oil will do more harm than good to global growth. Yet there are important differences in the condition of the world economy today compared with 2011. “The shale revolution, lower energy intensity, and higher general price levels mean the impact will be smaller than it once was,” economists led by Jamie Murray wrote in a recent report. “The price of a barrel will have to go much higher before global growth slips on an oil slick.” 3) How will Iran and Trump impact the market? Geopolitics remains a wild card. Renewed US sanctions on Iran are already crimping the Middle East nation’s oil exports. While President Donald Trump is pressuring the Organization of Petroleum Exporting Countries to pump more, there is limited spare production capacity. In addition, supply from nations including Venezuela, Libya and Nigeria is being buffeted by economic collapse or civil unrest. Still, Goldman Sachs analysts predict $100 will not be passed. 4) Who wins from higher oil prices? Most of the biggest oil-producing nations are emerging economies. Saudi Arabia leads the way with a net oil production that’s almost 21 per cent of gross domestic product as of 2016 — more than twice that of Russia, which is the next among 15 major emerging markets ranked by Bloomberg Economics. Other winners could include Nigeria and Colombia. The increase in revenues will help to repair budgets and current account deficits, allowing governments to increase spending that will spur investment. 5) Who loses? India, China, Taiwan, Chile, Turkey, Egypt and Ukraine are among the nations who would take a hit. Paying more for oil will pressure current accounts and make economies more vulnerable to rising US interest rates. Bloomberg Economics has ranked major emerging markets based on vulnerability to shifts in oil prices, US rates and protectionism. One of the biggest winners might also find itself on the losing end: Oystein Olsen, Norway’s central bank governor, warned that western Europe’s biggest petroleum producer risks problems if the industry takes its eyes off controlling costs. 6) What does it mean for the world’s biggest economy? A run-up in oil prices poses a lot less of a risk to the US than it used to, thanks to the boom in shale oil production. The old rule of thumb among economists was that a sustained $10 per barrel increase would shave about 0.3 percent off of US output the following year. But tallies now, including that of Moody’s Analytics chief economist Mark Zandi, pencil in a hit of around 0.1 percent. While the diminishing American reliance on imported oil has positive economic consequences at the industry level, poorer households would feel the weight of higher prices at the pump. They spend about 8 percent of their pre-tax income on gasoline, compared to about one percent for the top fifth of earners. 7) Will it lead to higher inflation around the world? Energy prices often carry a heavyweight in consumer price gauges, prompting policymakers including those at the Federal Reserve to focus simultaneously on core indexes that remove volatile energy costs. But a substantial run-up in oil prices could provide a more durable uptick for overall inflation if the costs filter through to transportation and utilities. 8) What does it mean for central banks? If stronger oil prices boost inflation, central bankers on balance will have one less reason to keep monetary policy loose. Among the most-exposed economies, central bankers in India already are warning about the impact as the nation’s biggest import item gets more expensive. Greater overall price pressures also could prompt faster monetary policy tightening in economies such as Thailand, Indonesia, the Philippines and South Africa.
PM Modi says paucity of energy does not let any nation come out of poverty
Prime Minister Narendra Modi said today energy is essential for financial development and its paucity does not let any nation come out of poverty. Claiming that the day is not far when India will overtake Britain’s economy, he said while 13 crore families received gas connections in the country in 60 years, his government gave connections to 10 crore families in the last four years. Modi was addressing a gathering after inaugurating the Mundra LNG Terminal, Anjar-Mundra and the Palanpur-Pali-Barmer gas transmission projects at Anjar in Kutch district of Gujarat. “Energy is essential for development. Paucity of energy does not let any nation come out of poverty. If one needs freedom from poverty, wants financial development and a self-sufficient country, energy is necessary. Without it, even a mobile phone cannot be charged,” he said. Modi said several prime ministers and chief ministers came and went, but he was fortunate to get the opportunity to inaugurate the third LNG (liquefied natural gas) terminal. “Gujarat is the gateway and hub for LNG and the epicentre of energy. As the third LNG terminal is dedicated to the country, all of them will fulfil their responsibility of sending energy to the east coast,” he said. He said there was a time when people were happy with ‘kachcha’ roads, but now people want modern development. Now, people want railway, highway, i-way, gas grid, water grid, power grid, optical fibre network. In a way people want modern infrastructure, he said. “In 60 years, 13 crore families received gas connections in the country. In four years (since coming to power), we gave connections to 10 crore families,” Modi said. The prime minister said his government’s aim is that in the coming days no family would have to cook on wood. “The day is not far, when the country’s economy will overtake Britain’s economy,” he added.
India to invest Rs 1.75 trillion for biogas plants in five years, says Dharmendra Pradhan
* India will invest 1.75 trillion rupees ($24.03 billion) for setting up compressed biogas plant in five years, Oil Minister Dharmendra Pradhan said on Monday * India aims to produce 15 million tonnes of biogas by 2023, Pradhan added.