OPEC has vowed to cut oil supplies by 1.2 million barrels per day, analysts are expecting prices to jump back to $70 a barrel.
Petrol and diesel prices have not been hiked in the last two months. In Delhi, petrol price has come down from Rs 81.5 per litre to 71.55 per litre in the last 60 days due to the massive fall in oil prices. However, now that oil cartel the Organisation of the Petroleum Exporting Countries (OPEC) has vowed to cut oil supplies by 1.2 million barrels per day, analysts are expecting prices to jump back to $70 a barrel.
This means that petrol and diesel prices will follow the suit unless there is an intervention by the government. However, the news is that oil analysts are not expecting oil to surge back to $85 a barrel anytime soon, which means that petrol and diesel prices are also unlikely to surge to record high levels.
On October 3, the government announced excise duty cut of Rs 1.5 a litre on both petrol and diesel and also asked oil companies to absorb a loss of Re 1 per litre. Following the central government’s decision, several states also gave relief of Rs 2-2.5 per litre on fuel by cutting VAT. Then, oil was hovering around $84-86 a barrel.
But, soon, several factors such as waiver to eight countries, including India, from Iran sanctions, increase in output of West Texas Intermediate (WTI) and supply increase by OPEC led to a massive fall in the oil prices to as low as $60 a barrel from $85 a barrel in just two months. Following this, the OPEC swung into action and decided to cut supplies again to push oil prices up.
In India, fuel prices are deregulated, which means that oil companies decide the price of oil based on market factors. Crude oil price and the value of the rupee against the dollar are two most significant factors that impact fuel prices.