Weakening rupee against dollar & war, Petrol diesel prices may go up this week

New Delhi: Petrol and diesel prices are likely to be hiked this week as oil companies prepare to pare losses accumulated from keeping rates steady for over four months in the run-up to Assembly elections in five States, including UP, despite international oil prices jumping to a 13-year high of USD 140 per barrel.

West Texas Intermediate crude futures, the US oil benchmark, rose to USD 130.50 per barrel on Sunday evening, its highest since July 2008, before retreating. The international benchmark, Brent crude, hit a high of USD 139.13 at one point overnight, also its highest since July 2008. To compound things, the Indian rupee tumbled to a record low of 76.9812 per dollar on Monday.

India relies on overseas purchases to meet about 85 per cent of its oil requirement, making it one of the most vulnerable in Asia to higher oil prices. The twin blows of oil prices, already up more than 60 per cent this year, and a weakening rupee may hurt the nation’s finances, upend a nascent economic recovery and fire up inflation. Petrol and diesel prices need to be increased by Rs 15 a litre for fuel retailers to break even, industry sources said. Since 2017, fuel prices are to be adjusted daily in line with the



benchmark international rate in the preceding 15 days. But rates have been on the freeze since November 4, 2021.

The basket of crude oil that India buys rose above USD 111 per barrel on March 1, according to information from the Petroleum Planning and Analysis Cell (PPAC) of the oil ministry. This compares to an average of USD 81.5 per barrel price of the Indian basket of crude oil at the time of freezing of petrol and diesel prices four months back. “With the last phase of polling ending on Monday, it is now expected that the government will allow state-owned fuel retailers to return to daily price revision,” an industry official said.

But oil companies are not expected to pass on the entire loss in one go and they will moderate it – raising rates by less than 50 paise a litre every day.

Domestic fuel prices – which are directly linked to international oil prices as India imports 85 per cent of its oil needs – have not been revised for a record 123 days in a row. Rates are supposed to be revised on a daily basis but state-owned fuel retailers IOC, BPCL and HPCL froze rates no sooner did electioneering to elect a new government in Uttar Pradesh, Punjab and three other States.