Here’s why fuel prices in India may not come down in a big way — at least not this year
Fuel prices hit another all-time high on June 7 with petrol in Delhi costing ₹94.46 per litre and in Mumbai costing ₹101 per litre. The retail price of how much it costs to fuel your car has jumped by 4% in the past one month. While many are hoping that this is just a temporary surge, petrol is unlikely to get cheaper, by any significant amount, this year. The net effect of the rise in fuel prices — or if they remain high for too long — is bad for the economy because the ripple effect can make other things expensive. Which is why, the Reserve Bank of India (RBI) governor, Shaktikanta Das, reiterated his request for a reduction in taxes and duties on fuel to keep inflation under control during the bio-monthly monetary policy update on June 4. There are at least five factors that determine the final retail price of fuel, petrol or diesel. These include the price of the key raw material, crude oil, the exchange rate for the US dollar against the rupee, the cost of refining, government taxes and the level of consumer demand. Here’s why the spike in fuel prices — whether its diesel or petrol — may be here to stay: Global crude oil prices are likely to remain high this year BCCL Last week, the price of Brent crude was at its highest levels since May 2019 crossing the $71 per barrel mark. The US Energy Information Administration (EIA) expects Brent crude oil prices to average at $62.26 per barrel this year. This is nearly one and a half times the average price for last year. The World Bank has pegged its estimate at $56 per barrel in 2021 while the International Monetary Fund’s (IMF) prediction is $59.74. However, these are the average prices accounting for all the highs and lows. US’ leading investment bank Goldman Sachs expects Brent prices to hit $80 per barrel over the next six months before starting to come down. If the unrest in the Middle East escalates or if the new Iran nuclear deal further stalls supply, the price of crude oil could go up further.
GAIL India offers U.S. LNG cargo from Sabine Pass, sources say
GAIL (India) has offered a liquefied natural gas (LNG) cargo for loading from the Sabine Pass terminal in the United States on July 30, three industry sources said on Monday. The tender closes on June 8, they added. The Indian importer has 20-year deals to buy 5.8 million tonnes a year of U.S. LNG, split between Dominion Energy’s Cove Point plant near Maryland and Cheniere Energy’s Sabine Pass site in Louisiana.
Fuel price hike: Pradhan blames it on global crude oil price surge
Union Petroleum and Natural Gas Minister Dharmendra Pradhan on Monday blamed the recent surge in global crude oil prices for the fuel price hike in India. Noting that petrol and diesel have become costlier in recent times, Pradhan said it is up to the GST Council to decide whether the fuel should be brought under the Goods and Services Tax, which, many believe, would substantially bring down the prices. “The prices of petroleum products have gone up. The main reason is that the price of crude oil has gone over USD 70 (per barrel) in the international market. This negatively impacts consumers here, as India imports 80 per cent of its oil requirement,” he said. The minister was responding to a query raised by reporters about the recent fuel price hike. He was in Gandhinagar to witness the signing of an MoU between the Gujarat government and the Indian Oil Corporation about the expansion in IOC’s refinery in Vadodara. Asked about his stand to include fuel in the GST regime as a measure to give respite to citizens from the price rise, Pradhan said he agrees with the idea. “The price of this commodity is regulated by the global market. As a sector in-charge, I am of the opinion that fuel should be brought under the GST. But, it will be done only when members of the GST council reach a consensus on it. It is the GST Council which will take a collective decision about it,” he said. Earlier in the day, Congress leader Rahul Gandhi hit out at the Centre over the rise in petrol prices, and said the waves of tax collection epidemic are continuously coming. His remarks came as petrol prices in several cities crossed Rs 100 and were nearing the mark in Delhi. “The process of unlocking has started in many states. While paying the bill at the petrol pump, you will see the rise in inflation by the Modi government. The waves of tax collection epidemic are continuously coming,” Gandhi said in a tweet in Hindi. The Congress has been critical of the government over the rising prices of petrol and diesel. The opposition party has also been demanding that petrol and diesel be brought under the purview of the GST regime.
BPCL to set up super absorbent polymer plant at Kochi with own technology
Privatisation-bound Bharat Petroleum Corporation is setting up a 50,000 metric tonne per annum super absorbent polymer plant at the Kochi Refinery, the technology for which was developed in-house. In the first phase of the proposed plant, the company will have a 200 metric tonne capacity plant by October and the feedstock will be supplied by the adjoining refinery. Capacity will be augmented in stages and will come up at a different location that will be identified later, P Ravitej, executive director, refineries, BPCL, told this evening. Super absorbent polymers, currently imported, are niche petrochemical ingredients used in various hygiene products such as diapers and other incontinence products. Ravitej said the plant will help the country save foreign exchange worth Rs 1,000 crore as it will help cut down on imports. “Our engineers and researchers have worked four years on this project and finally mastered this technology,” he said. Asked whether this is part of the upcoming propylene derivatives petrochemical complex, he answered in the negative. This plant will use the acrylic acid from the recently commissioned Rs 6,000-crore propylene derivatives petrochemical complex at the Kochi Refinery, as the feedstock, he explained. Pointing out that this development shows BPCL’s ability to master complex technologies to produce complex products like the super absorbent polymers, Ravitej said the SAP process development is our pioneering initiative towards independence in technology and value addition to the recently commissioned acrylic acid unit installed at the refinery complex. Kochi Refinery was set up way back in 1966 with a capacity of 50,000 barrels per day originally as a joint venture in collaboration with Phillips Petroleum Corporation of the US. Today it is the largest refinery of BPCL with refining capacity of 15.5 million metric tonne per annum. Apart from petrol, diesel, kerosene and aviation fuel, the refinery also manufactures specialty products such as benzene, toluene, food grade hexane, propylene, special boiling point spirit, mineral turpentine oil, sulphur, petcoke and hydrogen. The company has commissioned two of the three units of the PDP complex in February,making it first such plant in the country, and thus helping save Rs 4,000 crore in foreign exchange annually. Of the three units, acrylic acid and acrylates units are already up and running. The acrylic acid unit is the largest single train unit in the world with capacity of 1.6 lakh metric tonne per annum.
Asia’s oil giants will be key to global climate fight: S&P
Asia’s carbon cutting will be critical to the effort to reduce global warming as the region releases more carbon dioxide than rest of the world combined, S&P Global Ratings said on Monday. The region does have one big policy advantage: its governments typically control at least one national oil company (NOC). S&P expects the NOCs will set the pace in Asia in slashing carbon emissions even if this undermines their profits and credit standing. “Asian NOCs will likely find it difficult to transition to an entirely new business model,” said S&P Global Ratings credit analyst Danny Huang. “They may strand assets in the process, and they probably will not be as successful in renewable energy, carbon capturing, electric vehicle recharging, and they like, as they are at making and selling fossil fuels.” Moreover, the transition could happen much more quickly than we now anticipate — say in five to 10 years instead of 10 to 20 years. A fast transformation may be messy and disruptive. Yet the move to carbon neutrality is one of the biggest policy challenges facing any nation. In Asia, much of the burden rests on the shoulders of the NOCs. Many have already committed to targets that outpace the government’s carbon goals. “The firms are simply the most obvious and effective lever that states can pull in achieving net-zero emissions. But what is good for the planet may not be good for credit metrics or ratings on NOCs,” said Huang.