Amidst international price cuts for crude oil, oil companies in India have also slashed petrol and diesel prices by more than Rs. 2 per litre.
The recent fall in global oil prices has led to a decrease in fuel prices in India as well. Petrol is now cheaper by Rs. 2.69, the lowest in 9 months, while diesel now costs Rs. 2.33 less, which is the lowest in 13 months. This brings the current fuel prices down to Rs. 70.29 and Rs. 63.01 for petrol and diesel, respectively.
Petrol and Diesel prices have been falling steadily in India
The fall in crude oil prices follows the drop in demand for US oil after the outbreak of Covid-19, the infamous coronavirus. Fuel prices have been on a steady decline since 27th February, courtesy falling international prices for crude oil. The prices fell by nearly 31 per cent on Monday (9th March 2020), hurt by Russia’s effort to undercut its US rival, thus breaking the OPEC alliance.
“For now, what we know for sure is that the month of February will record the worst oil demand contraction since the Great Recession. We also know that global aviation will be hit very hard across Asia and take months to get back in shape"
- Claudio Galimberti
Head of demand, refining and agriculture analytics
S&P Global Platts
OPEC, short for Organization of the Petroleum Exporting Countries, is an alliance of 14 nations that are responsible for nearly 44 per cent of global oil production and around 81.5 per cent of the world's oil reserves. Thus, OPEC nations hold considerable power over international oil prices. Russia, although not a core member of OPEC alliance, sends representatives to participate in official meetings as observers, informally helping to coordinate policies.
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Previously, OPEC functioned as an anti-competitive cartel, working in tandem to maintain high price by limiting production, instead of competing against each other and offering reduced prices. With US oil falling in demand, Russia broke the three-year partnership, stating that a production cut or limit would benefit America more than OPEC members. Saudi Arabia retaliated by slashing prices further and planning to ramp up production, thus beginning the "price wars".
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The plummeting crude oil prices are currently beneficial for India, as over 84 per cent of the country’s demand for oil is fulfilled via imports. With lower import costs, the economy could have a fighting chance at recovery, especially the Indian automobile industry, which is currently in a struggling state.