India’s fuel sales drop 9.4 per cent in April on COVID wave
India’s fuel demand slumped 9.4 per cent in April when compared to the preceding month as lockdowns clamped in several states to curb the second wave of coronavirus sweeping the nation pummelled demand, official data showed on Wednesday. Fuel consumption fell 9.38 per cent to 17.01 million tonnes in April from 18.77 million tonnes in March, data from Oil Ministry’s Petroleum Planning and Analysis Cell (PPAC) showed. India was under one of the world’s severest lockdowns in April 2020, bringing to a halt almost all economic activity. Fuel sales had halved that month, plunging to the lowest since 2006. Comparing on a yearly basis, fuel demand surged 81.5 per cent from April 2020 lows. Sales of petrol — used in cars and motorcycles — fell to 2.38 million tonnes in April, the lowest since August. Petrol sales in April were 13 per cent lower than March 2021 and 3 per cent lower than April 2019. Petrol sales in April 2020 were 9,72,000 tonnes. Demand for diesel — the most used fuel in the country — fell to 6.67 million tonnes in April 2021, down 7.5 per cent from the previous month and 9 per cent from April 2019. Diesel sales in April 2020 were 3.25 million tonnes. With airlines continuing to operate at less than capacity, jet fuel (ATF) sales in April were 4,09,000 tonnes, down 14 per cent over March 2021 and 36.7 per cent over April 2019. Jet fuel sales in April 2020 were 5,500 tonnes. Sales volume of cooking gas LPG fell 6.4 per cent to 2.1 million tonnes in April 2021 when compared to the previous month. The sales were 11.6 per cent higher than 1.9 million tonnes in April 2019. Bitumen, used in making roads, consumption fell to 6,58,000 tonnes in April 2021 from 9,04,000 tonnes in the previous month. It was lower than 6,91,000 tonnes sales in April 2019. Indian authorities are scrambling for vaccines, medicines and oxygen as the nation faces its worst health crisis. Death crossed 2.5 lakh on Wednesday in the deadliest 24 hours since the pandemic began, as the disease rampaged through the countryside. Deaths swelled by a record of 4,205, while infections rose 3,48,421 in the 24 hours to Wednesday. The death toll now stands at 2,54,197, while the total caseload stands at 2.33 crore. Fuels sales could have been worse in April, but the elections in some states saw increased use of vehicles for campaigning. Demand is likely to witness a sharper slump in May due to more impending restrictions. Declining fuel sales will reduce crude intake by refiners, reducing operating run rate. “India’s 2Q21 (April-June) oil demand is projected to be impacted by the recent surge in COVID-19 infection cases,” OPEC said in its monthly oil report. “Recent mobility data show weakness in performance towards the end of April and this is anticipated to last well into the month of May and possibly June putting the whole 2Q21 oil demand performance in check.” However, some support might emerge from increased usage of private vehicles over public transportation, which could cap declines in transportation fuels demand, it said. OPEC forecast an 11 per cent growth in fuel demand to 4.88 million barrels per day. Projections, it said, will depend on many factors that will affect the magnitude of the impact on the demand. “These include government containment measures which are projected to be localised and targeting specific regions, the speed of vaccination rollouts and their positive impact on reducing hospitalisation and death rates, and lastly how quickly the population will adapt to COVID-19 measures,” it said.
Base price of petrol, diesel up Rs 4 but retail rates rise Rs 20 in a year
Fuel prices have gone up by more than Rs 20 since May 2020, even though the base cost of petrol and diesel has risen by only Rs 3-4 a litre during this time, as last year’s sharp tax hikes harden the pinch of the current oil price rally. On May 1, 2020, petrol cost Rs 69.59 a litre at pumps in Delhi, the reference market, on a base price of Rs 27.95. Diesel retailed for Rs 62.29 on a base price of Rs 24.85 a litre. Data for this May 1 shows the base price of petrol going up by Rs 3.53 to Rs 31.48 but retail price rising by Rs 20.81 to Rs 90.40 a litre. Similarly, the base price of diesel is Rs 4.17 is more than May 2020 but the retail price is up Rs 20.32 at Rs 82.61 a litre. Some could argue that India’s crude cost has risen from $31 per barrel in May 2020 to $66 at present. Indeed, crude is a factor in pricing fuels. But petrol and diesel prices are set according to their international quotes and the rupee-dollar exchange rate. This explains why base prices have risen modestly and not doubled the way crude has. The answer to the conundrum lies in the Centre’s tax hikes last year and subsequent increase in VAT by states. The Centre raised excise duty by Rs 13 on petrol and Rs 16 on diesel between March and May last year when oil prices collapsed due to the pandemic. The two hikes raised excise duty 65% on petrol from Rs 19.98 to Rs 32.98 a litre and 79% on diesel from Rs 15.83 to Rs 28.35. Excise duty accounts for 36% and 34%, respectively, of the current retail price of petrol and diesel. VAT accounts for about 22% in Delhi and more in other states such as Rajasthan, Madhya Pradesh and Maharashtra. These taxes amplify the net impact for consumers when retailers raise the base price in tune with the global oil market. Revisions prompted by crude rally since January pushed up petrol price to Rs 100 in the country on February 17. As demand for excise cut grew louder ahead of the state elections, the government shifted the blame on Saudi-led OPEC-Plus, saying the grouping was rigging oil prices by capping production. But the state-run retailers, who control 90% of the market, stopped the price revisions from February 28 till March 23 on government ‘nudge’, even though India’s crude cost topped $68 per barrel in between. Now that elections are over, the revisions are back and petrol price is hitting the century in more cities every day. After the last round of excise hike, retailers adjusted the additional duty against higher margins from cheaper crude. But when states took the cue and raised VAT. The retailers raised pump prices to pass on the burden. Yet, consumers remained largely unaffected as the country was under lockdown. The Budget 2021 slapped agriculture infrastructure development tax of Rs 2.50 and Rs 4 a litre on petrol and diesel, respectively. But the amount of Central taxes remained unchanged at Rs 32.90 on a litre of petrol and Rs 31.80 on diesel as the agriculture cess was offset by an equivalent reduction in the basic excise and special additional excise duties on the fuels.
US gas prices rise amid key pipeline shutdown
The national average gas prices in the US have increased above $3 a gallon for the first time since 2014 amid the six-day shutdown of a major fuel pipeline following a cybersecurity attack. On an average, Americans on Wednesday paid $3.008 for a gallon of gas, up from $2.985 the previous day and $2.927 one week ago, Xinhua news agency quoted the American Automobile Association (AAA) as saying. The US auto club on Monday had forecasted gas prices to climb this week in reaction to the shutdown of the Colonial Pipeline, which delivers approximately 45 percent of all fuel to the East Coast. “This shutdown will have implications on both gasoline supply and prices, but the impact will vary regionally,” AAA spokesperson Jeanette McGee had said in a statement on Monday. “Areas including Mississippi, Tennessee and the east coast from Georgia into Delaware are most likely to experience limited fuel availability and price increases,” McGee said, adding these states may see prices increase three to seven cents this week. Secretary of Energy Jennifer Granholm on Tuesday urged Americans not to hoard gasoline. “It’s not that we have a gasoline shortage. It’s that we have this supply crunch. And that things will be back to normal soon,” she said. On Wednesday evening, Colonial Pipeline announced that the first step in the restart process started at approximately 5 pm. “Following this restart, it will take several days for the product delivery supply chain to return to normal. “Some markets served by Colonial Pipeline may experience, or continue to experience, intermittent service interruptions during the start-up period,” it added. However, a growing number of gas stations along the East Coast are without fuel as the panic-buying continued amid concerns over the shortage of gas. As of Wednesday morning, 28.2 per cent of all gas stations in North Carolina, 17.45 per cent in Georgia and 17.09 per cent in Virginia were without gasoline, according to the latest data from GasBuddy, which tracks fuel demand, prices and outages. The Colonial Pipeline Company temporarily halted all pipeline operations after the cybersecurity attack involving ransomware was detected on May 7. The Colonial Pipeline is the largest refined-products pipeline in the US, transporting more than 100 million gallons of fuel daily on the East Coast.
ONGC removes marketing margin but refuses to lower gas price
State-owned Oil and Natural Gas Corporation (ONGC) has agreed to do away with charging users a marketing margin on the gas it plans to produce from its KG basin field but refused to lower the minimum rate, according to tender documents. ONGC, India’s top oil and gas producer, last month sought bids for sale of initial 2 million standard cubic meters per day of gas from its KG-DWN-98/2 block (KG-D5). The company asked bidders to quote a rate linked to prevailing Brent crude oil prices. It fixed the floor or minimum rate at 10.5 per cent of the three-month average Brent crude oil price. On top of it, the firm sought USD 0.20 per million British thermal unit. Potential bidders however opposed the levy of the marketing margin as well as the “high” floor price. Responding to queries raised by bidders, ONGC said the floor price cannot be changed but marketing margin is being dropped. “Change in Reserve Gas Price (floor rate) is not agreed. However, considering requests from various bidders, the levy of marketing margin of USD 0.20 per mmBtu over and above contract price is removed,” it said. At the current Brent crude oil price of close to USD 70, the minimum price comes to USD 7.3 per million British thermal unit. This price, however, will be subject to the ceiling or cap fixed by the government for deepsea fields every six months. The cap for six months beginning April 1 is USD 3.62 per mmBtu. This essentially means that bidders may corner gas by offering to pay USD 7, but the buyers will have to pay no more than the ceiling price of USD 3.62. ONGC in the tender offered to sell 2 mmscmd of gas for a duration of 3 to 5 years at Odalarevu in East Godavari district of Andhra Pradesh, which is connected to state gas utility GAIL’s KG basin pipeline network as well as PIL’s East West Pipeline which is connected to KG basin network and further to Gujarat gas grid. “Bidder is required to quote ‘P’, which would be the slope to Dated Brent Price. This slope should be more than or equal to 10.5 per cent,” the tender document said adding that ‘P’ can be made in the increment of 0.1 per cent.” Gas price (in USD per mmBtu) “shall be the lower of the quoted slope (per cent) * Dated Brent Price or notified ceiling price during the period,” it said. The auction is to be conducted next week. In pre-bid meetings, bidders raised the issue of high reserve price. Bid prices starting from 10.5 per cent of dated Brent price must be revised downwards so as to account for cheaper alternatives available from other LNG terminals, according to a bidder query posted on the ONGC tender document. Another bidder said, “Regarding the pricing formula, it is of our view that the starting slope to dated Brent price at 10.5 per cent is quite a higher side. Crude oil demand is going to recover this year and it is going to increase in short. In other domestic gas tenders from KG-D6 (2 years back) was also linkage with brend however the slope was very low ie 8.5 per cent.” “Also our gas consumption points are in western and northern part of India and the location of the gas field on eastern side also adds up transportation cost of multiple transporters. Considering the above factors, we request for a reduction in slope.” Yet another bidder said, in view of outcomes of the recent domestic auctions, and further in consideration of the higher transportation costs in evacuating gas to west and north India, request is that the reserve gas price be changed to 9.5 per cent of Dated Brent Price. “In the current global/local gas market scenarios with improved market priced domestic gas availability, spot LNG with endless flexibilities matching specific requirements of customers, uncertainty of demand and affordability of small scale manufacturing sector, proposed Reserve Gas Price of 10.5 per cent is not reflective of current market reality,” another bidder said. “Also, in the instant case, considering marketing margin of USD 0.20 per mmBtu on GCV basis plus Rs 16.14 transportation tariff of KG basin pipeline network up to PIL interconnect point, the Reserve Gas Price works out to be more than 11 per cent. In view of above, ONGC is requested to consider pragmatic gas reserve gas price of 8.5 per cent offering win-win proposition to ONGC and prospective bidders,” the bidder added. In the bid document, ONGC said the marketing margin was to cover the cost of marketing and it does not form a part of the ceiling gas price. Gas supplies from the block, which sits next to Reliance Industries Ltd’s KG-D6 block in Bay of Bengal, is to start from end-June. Earlier this month, Reliance Industries Ltd and its partner BP Plc of UK sold 5.5 mmscmd of additional natural gas from KG-D6 at a rate linked to Platts JKM (Japan Korea marker) – the liquefied natural gas (LNG) benchmark price assessment for spot physical cargoes. The lowest bid that can be placed is JKM minus USD 0.3 per million British thermal unit. The highest acceptable bid would be JKM plus USD 2.01 per mmBtu. This is the same benchmark RIL-BP had used in February to sell out 7.5 mmscmd of gas from the block. ONGC’s KG-DWN-98/2 or KG-D5 block is expected to have a peak production rate of 15.25 mmscmd of natural gas and 80,000 barrels per day of oil. The company is likely to come out with another tender later this year for the sale of 5 mmscmd of gas from next year.