From a high of about $129/barrel in March 2022, crude oil prices have fallen below $80/barrel. Let’s understand why prices have fallen again and what it will mean for consumers!
Why Have Crude Prices Fallen?
At the start of December 2021, Brent crude prices were around $68/barrel levels, which then went to a high of $129/barrel and is currently back below $80/barrel levels!
What explains the fall is a recessionary fear in the developed economies such as the US and Europe, a slowing global economy as we enter 2023, and further monetary tightening by Central Banks across the world.
Moreover, the supply disruption issues that followed the Russia-Ukraine war have cooled off as Russia’s production is back to the pre-war levels.
How Will it Benefit India?
Falling crude prices are always beneficial for a country like India, which imports 85% of its oil requirements. It will help bring down India’s import bill and help us narrow the trade deficit. Next, demand for dollars to pay for oil imports will reduce, thereby supporting the rupee!
Most importantly, lower energy prices in future will bring down imported inflation, which has been a concern across the globe for almost a year now! This will also help slow the RBI’s interest rate hike cycle!
Can Consumers Expect a Fall in Retail Fuel Prices?
Although petrol and diesel retail rates are linked to international prices, consumers in India won’t be able to enjoy the benefits of falling crude oil prices immediately.
The reason is that domestic fuel prices have been fixed since April 2022, and oil marketing companies sold petrol and diesel below market rates and incurred huge losses. As a result, these companies will first look at recovering their losses before passing on the benefits of falling oil prices to consumers.
Thus, retail fuel prices may come down for consumers, but with a time lag!
