After an enduring period of stability lasting over a year, there are reportedly imminent expectations for a decline in petrol and diesel prices across the country. The government has initiated talks to ensure that the advantages of the declining global crude prices are passed on to consumers before the upcoming 2024 Lok Sabha elections.
Contrary to the significant losses witnessed in 2022, where petrol experienced a peak loss of Rs. 17 per litre and diesel Rs. 35 per litre, Oil Marketing Companies (OMCs) are currently reporting a profit margin ranging between Rs. 8 to 10 per litre on petrol and Rs. 3 to 4 per litre on diesel. Sources indicate that the oil ministry has engaged in discussions with OMCs regarding the correlation between crude prices and retail rates.
With OMCs now operating at a profit, the government is actively deliberating ways to provide relief to the populace, as mentioned in the report. Both the finance ministry and the oil ministry are delving into the prevailing crude oil price dynamics, considering not only OMC profitability but also global variables influencing the market, as per the report.
What's behind the expected fuel price reduction?
OMCs have showcased robust profits in the last three quarters, leading to a significant reduction in their overall losses. The collective profit of three prominent OMCs - IOC, HPCL, and BPCL - amounted to Rs. 28,000 crore in the last quarter, according to the report. As the under-recovery phase for OMCs concludes, the government believes it's time for consumers to partake in the benefits as well.
Recent fluctuations in oil prices were spurred by concerns over dwindling demand and lingering uncertainty surrounding the depth and duration of OPEC+ supply cuts. A Reuters survey revealed a decline in OPEC oil output during November, marking the first monthly drop since July. This was attributed to reduced shipments from Nigeria and Iraq, in addition to sustained market-driven cuts by Saudi Arabia and other members of the OPEC+ alliance.
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