The wait for fuel price cut gets longer on volatile oil

NEW DELHI: Fuel retailers in no rush to pass on to consumers the benefit of cheaper crude and will wait and watch for the market volatility to ebb before taking a call, a senior petroleum ministry official said on Thursday, even as brokerages estimated the companies are raking in Rs 8-9 as marketing margin on petrol and diesel. “Oil prices continue to be volatile. They fell one day last week to below $70 (per barrel) but rose the next day... They (state-run fuel retailers) don’t want a situation where they cut prices one day and have to raise them again,” the official said. As reported by TOI on September 4, the retailers could reduce petrol and diesel prices before the Maharashtra assembly elections if oil stays below $80 per barrel. Benchmark Brent crude slumped to $70/barrel last week, the first time in two years, as fear of oversupply grew amid poor show by the major economies, especially China, the world’s second-largest oil consumer. On Thursday, however, Brent rebounded to hover below $75, buoyed by the US interest cut. The officials said there are a lot of decisions globally that can affect oil prices . “People are looking at various new data points. For example, how much is the drawdown of crude? What is China’s PMI looking like? What kind of numbers are coming out of China in terms of purchase and storage of crude, refinery margins, refinery bankruptcies, etc.,” the official said. Fuel prices were last cut ahead of the Lok Sabha elections on March 14 by Rs 2 per litre. Prior to that, the prices had had remained frozen since May 22, 2022 when the Centre last reduced excise duty. This was the second excise duty reduction in seven months and came after a similar duty reduction on November 4, 2021. The two reductions together had brought down the excise duty on petrol and diesel by a total of Rs 13 and Rs 16 per litre, respectively. After the second duty cut, the BJP-ruled states also implemented matching cuts in VAT to soften the impact of oil prices surging above $100 per barrel after the Ukraine conflict.