New Delhi:
International oil prices rose to more than seven years on Thursday, a seven-year high of $103 a barrel after Russia attacked Ukraine, but supply lines to India remain unaffected, said a senior government official who expresses confidence in uninterrupted fuel supply even if it does. conflict escalates.
For consumers, the spike in global oil prices will not yet have an immediate impact as state-owned fuel retailers continue to maintain tariffs on petrol, diesel and LPG.
“The supply lines are all open. None of them have been affected (by the Russian aggression). There is an abundance of supplies on the market,” said the official, who did not want to be identified. “Our suppliers are located in the Middle East, Africa and North America, which are unaffected by the conflict and will continue to supply oil and gas normally. That situation is likely to persist even if the current conflict escalates.” However, prices are a concern as they will fuel inflation.
“Retail prices are on hold, but eventually they will have to be increased at some point,” the official said.
Brent oil rose to a whopping $103.78 a barrel, the highest since August 14, 2014, and stood at $103.40 at 3 p.m., an increase of $6.71 or 6.93 percent.
India, the world’s third largest oil consumer, relies on imports for 85 percent of its needs. The imported oil is converted into products such as petrol, diesel and LPG.
Saudi Arabia, Iraq and other Middle Eastern countries account for 63.1 percent of all imports. Africa is the second largest supplier, accounting for nearly 14 percent of all deliveries, while North America supplies 13.2 percent.
Russia accounts for a third of Europe’s natural gas and about 10 percent of global oil production. About a third of Russian gas supplies to Europe usually go through pipelines that cross Ukraine.
But for India, Russian stocks are a very small percentage. While India imported 43,400 barrels of oil per day from Russia in 2021 (about 1 percent of total imports), coal imports from Russia at 1.8 million tons in 2021 represented 1.3 percent of all coal imports. India also buys 2.5 million tons of LNG per year from Gazprom in Russia.
In retaliation for the Russian attack, the United States, the European Union, Britain, Australia, Canada and Japan have imposed sanctions on Russian banks and wealthy individuals, while Germany halted a major gas pipeline project from Russia.
Energy and other trades are now out of the sanction range.
“Availability is not a concern. We are getting normal supplies and none of the suppliers have asked for a postponement,” said an official at Indian Oil Corp (IOC), the country’s largest oil company.
India, the government official said, is closely monitoring the evolving situation and is in contact with the US and other countries.
While supply is of little concern to India at the moment, it is prices that are of concern.
Domestic fuel prices – which are directly related to international oil prices – have not been revised for 113 days in a row.
Tariffs were said to be reviewed daily, but state fuel retailers IOC, BPCL and HPCL froze tariffs ahead of the election to elect a new government in Uttar Pradesh, Punjab and three other states.
Retail pump rates are set at $82-83 a barrel and are sure to rise once the election ends next month, industry officials said.
Petrol costs Rs 95.41 per liter in Delhi and diesel costs Rs 86.67. This price is after taking into account the excise duty reduction and a reduction in the VAT rate by the Government of Delhi.
Prior to these tax cuts, the petrol price had reached a record high of Rs 110.04 per liter and diesel came in at Rs 98.42. These rates matched Brent’s rise to a peak of $86.40 a barrel on October 26, 2021. Brent was $82.74 on November 5, 2021, before starting to decline, reaching $68.87 a barrel in December.
However, prices started rising after that, and are up 12 percent in February alone, they said.
Petrol and diesel prices have historically been frozen before crucial elections.
There was a 19-day price freeze on petrol and diesel ahead of the Karnataka polls in May 2018, despite international fuel prices rising nearly $5 a barrel. However, once the elections were over, oil companies quickly passed on the desired increase to customers – in 16 days in a row after May 14, 2018. Petrol price rose by Rs 3.8 per liter and diesel by Rs 3.38 per liter after the increase. .
Similarly, they had stopped reviewing fuel prices nearly 14 days before the Gujarat parliamentary elections in December 2017.
These companies had also imposed a freeze on petrol and diesel prices between January 16, 2017 and April 1, 2017, when parliamentary elections were held in five states – Punjab, Goa, Uttarakhand, Uttar Pradesh and Manipur.
During the 2019 general election, they moderated the review by not passing on all the desired rate increases to consumers, industry sources said. Rates started rising a day after the final phase of polls for the Lok Sabha elections ended.
The current 110-day interruption is the longest since the daily fuel price revision was passed in June 2017. Before that, there was an 82-day hiatus in the tariff revision between March 17, 2020 and June 6, 2020.
The 82-day pause in the tariff review in 2020 followed the government’s increase in excise duties on petrol and diesel by Rs 3 per liter each to wipe out gains from falling international tariffs. The government raised the excise tax again on 6 May 2020 by Rs 10 per liter on petrol and Rs 13 per liter on diesel.