With crude prices easing after spiking to a 14-year high in recent weeks, the government is of the view that an immediate cut in excise duty on fuel is not required. Senior Finance Ministry officials said it may be too early to react to a spike in prices which may not last for long as supply concerns are expected to ease in the coming weeks amid the ongoing Russia-Ukraine conflict.
The impact of higher crude prices in recent months has been borne by oil companies, which is likely to get translated into higher retail prices in coming weeks. Oil marketing companies (OMCs) have held the price of petrol and diesel constant since November 4 despite the price of crude oil rising by about 27 per cent during the period.
“We are genuinely not convinced that the hike in crude oil prices is for the long term. If it’s only for a few weeks, we cannot recalculate for a few weeks of spike. This may be too early to react or to jump too fast. If it comes down to below $100/bbl in the next six weeks, we’ll be in a different position,” a senior Finance Ministry official said.
The price of crude oil fell below the $100 barrel mark on Tuesday, after a two-week period, which saw the cost rise to $139 per barrel, its highest level in 14 years. Despite a fall in oil prices over the past week, price of Brent crude has risen around 29 per cent since the beginning of the year, amid concerns about stable supply of oil and gas.
A surge in Covid-19 cases in China, the largest importer of crude oil, and signs that a nuclear deal with Iran could boost global crude oil supplies, have helped cool oil prices which have been rising steadily since the beginning of the year due to the Russia-Ukraine crisis.
India imports about 85 per cent of its crude oil requirements. Russia is the third largest producer of crude, after the US and Saudi Arabia, and the second largest exporter after Saudi Arabia. Russia currently exports about 7.5 million barrels of crude oil per day. State-owned OMCs have kept the prices of petrol and diesel constant since November 4, when the government cut excise duty on petrol and diesel by Rs 5 per litre and Rs 10 per litre, respectively.
“No immediate action has been taken so far as oil companies have also gained cushion from lower prices during November-February,” the official said. Daily price revisions are likely to be restarted in coming weeks.
Earlier it was expected that there would be revision after the assembly elections in Uttar Pradesh, Punjab, Uttarakhand, Goa and Manipur. OMCs had held fuel prices constant for over 2 months during key state elections in 2021, with pump prices rising sharply post polls.