- Any country worth its salt is bound to keep an eye on the crucial oil front for not only driving the much-needed economic activities but also be able to ensure the common citizens are provisioned with the basic amenities without burdening them vis-à-vis high prices. Thus, the availability of oil is extremely critical for the progress of a country determined to reach greater heights. Those countries that are blessed with local production of oil must be considered fortunate unlike others dependent on imports for their energy needs. We all know how India is majorly dependent on importing crude oil from some of the largest and biggest producers around the world. Our major import bill going towards serving the oil requirements is known.
PC: DNA India
- How critical the oil prices in the country can be gauged by the fact that any fluctuation witnessed leading to a rise in the same is bound to give sleepless nights to the ruling dispensation. As such, the government cannot afford to relax one bit is visible whenever the global challenges force the crude oil prices to shoot up beyond acceptable levels. Of course, low global fuel price helps GOI. But frozen domestic pump prices are a distortion. Mind you, the Modi government heads into its last budget this term with international crude prices working in its favor. Indian basket was priced at $80.5 a barrel recently. Thankfully, the price trends since the Israel-Hamas conflict began in October have defied market fears of a surge.
- However, oil marketing companies (OMCs) are sitting pretty, getting a healthy profit margin out of each liter of petrol or diesel sold. This confluence of favorable factors, nonetheless, masks a worrisome reality. Oil pricing reforms are in cold storage. This is the crux of this article. Yes, retail petrol and diesel pricing have been market-linked since 2010 and 2014, respectively. GOI introduced a daily reset of prices in 2017 to allow fluctuations in international crude prices to be passed on to retail consumers. That remains policy, but only on paper. Retail prices of petrol and diesel have been frozen since May 2022. International crude prices kept fluctuating. But prices have trended downwards since 2022.
PC: The Indian Express
- This played a key role in helping central banks control inflation faster than initially expected after the Russia-Ukraine conflict broke out in February 2022. Countries often shield consumers from oil shocks through subsidies. But it’s usually a temporary measure and is meant to help markets adjust without sudden disruptions. This happened in May 2022 as the monthly average oil price shot past the psychologically important $100/barrel just after the outbreak of conflict in Europe. But this spike lasted just five months. After that, monthly average prices have consistently stayed below $100/barrel. Subsidies are extended for petrol, diesel, and cooking gas in the annual budget. Oil reforms stand buried by shutting down the price mechanism. This should be stopped.
