Indians bearing the brunt of raging oil prices could soon get some respite.
After 11 straight daily hikes, fuel prices have hit record highs in the country—petrol costs Rs77.17 per litre and diesel Rs68.53 in New Delhi. But here’s how things could improve, even if temporarily.
First up, there is political pressure on the government to soften the blow on end users. A decision in this regard is reportedly expected any time now from prime minister Narendra Modi. “The prime minister’s office has been provided data and inputs from OMCs (oil marketing companies). For the last one week, discussions have been going on regarding an excise duty cut, and a decision is imminent,” a finance ministry official told the Business Standard newspaper on Wednesday (May 23).
Central and state government duties on fuel constitute over half of the current retail prices in India. If the central government cuts duties, the states may be prodded into cutting the value-added tax. However, even then the relief to consumers could be limited if global prices continue to surge.
But then there are hopeful signs from abroad, too.
The world’s major oil producing countries are mulling hiking supplies to cool the market. A decision may be taken in June, according to a Reuters report.
Oil prices have gained nearly 20% this year due to the Oil and Petroleum Exporting Countries’ (OPEC) decision to cut supplies till the end of 2018 to reduce the global inventory significantly. By now, total stocks around the world are reportedly close to the OPEC’s target, and production has to rise to meet fresh demand.
Meanwhile, the US’s inventory has risen unexpectedly, reflecting a slide in demand in the world’s largest oil-consuming nation.
Last month, US president Donald Trump accused the OPEC of inflating prices.
Besides, if crude oil remains above $80 a barrel, American shale oil producers could also be back in business and that will help cap any further rise. Then there is the fact that major world economies, including those in Europe, have, so far, not really followed Trump’s call to stop oil purchases from Iran.
However, while all these factors could put a lid on global oil prices soon, it is up to the Modi government to decide how much of the pain it can absorb.