Union Petroleum Minister Hardeep Singh Puri has indicated that petrol and diesel prices in India could see a reduction if global crude oil prices remain stable over the next two to three months. However, he clarified that oil marketing companies (OMCs) are currently processing crude oil purchased during the peak of the West Asia conflict when international prices were significantly higher.
Speaking to reporters on Thursday, the minister explained that although global crude oil prices have declined, retail fuel prices cannot be adjusted immediately because oil companies generally purchase crude oil several weeks in advance.
OMCs Absorbed Massive Losses During Oil Price Surge
According to Hardeep Puri, state-owned oil marketing companies incurred losses of approximately ₹74,781 crore by selling petrol, diesel, and LPG below cost during the period leading up to June 30, when international crude oil prices surged due to geopolitical tensions in West Asia.
He noted that the crude oil currently being refined was purchased nearly two months ago, when prices were considerably higher than current levels.
"We are using the crude petroleum stock today that we had bought two months ago. If the decline in international crude prices continues for the next 2-3 months, then we will see. At this stage, it remains a hypothetical situation," the minister said.
Why Petrol and Diesel Prices Haven't Fallen Yet
The Petroleum Minister explained that crude oil procurement follows a long supply cycle. Oil marketing companies typically import crude oil around two months before it reaches refineries and is converted into petrol and diesel.
As a result, current retail fuel prices continue to reflect the cost of crude purchased during the period when global oil prices crossed $110 per barrel amid the Iran-West Asia conflict.
Crude prices began easing only during the second half of June after diplomatic developments helped reduce tensions in the region.
India Limited Fuel Price Hike During Global Crisis
Highlighting the government's pricing strategy, Hardeep Puri said India managed to keep fuel prices relatively stable despite the sharp increase in global crude oil prices.
According to the minister:
- Petrol prices increased by only 5.58% in India during the crisis.
- In comparison, developed countries witnessed fuel price hikes of nearly 20%.
- Several neighbouring countries experienced petrol price increases of around 35%.
He also emphasized that fuel supplies remained uninterrupted across the country, with more than 1.07 lakh fuel retail outlets continuing normal operations throughout the crisis period.
Nayara Energy Cuts Fuel Prices
Private fuel retailer Nayara Energy recently reduced petrol prices by ₹5 per litre and diesel prices by ₹3 per litre across its retail outlets from July 1, becoming the first major retailer to lower fuel prices after the decline in international crude oil prices.
However, Hardeep Puri clarified that Nayara's price reduction should not be viewed as a broader market trend.
According to the minister, Nayara had earlier increased petrol prices by ₹5 per litre during the crude oil price surge, unlike public sector oil marketing companies that largely absorbed the additional costs instead of passing them on to consumers. The recent price cut simply reverses that earlier increase.
Will Fuel Prices Reduce Soon?
Industry experts believe that if international crude oil prices remain stable or continue to decline over the coming months, state-run oil companies may eventually consider reducing petrol and diesel prices.
However, any decision will depend on crude oil procurement costs, inventory levels, exchange rates, and global geopolitical developments.
For now, consumers may have to wait until oil companies begin refining lower-cost crude purchased after the recent decline in international oil prices before any significant reduction in retail fuel prices becomes possible.
Inputs from agencies.