What Made Indian Oil Prices To Suddenly Change At This Time?

If you read our previous blog on gas prices in Tamil Nadu on Coronavirus: How Gas Prices Reacted Differently in Tamil Nadu?, then you would know how gas prices in the southern state has not changed a decimal point since the beginning of the lockdown on March 24th. Read more to learn about how these prices will be affected now that relaxations are being implemented in lockdown 5.0.

What Happened To Gas Prices?

After many months, petrol and diesel prices in Tamil Nadu have hiked for the first time. Petrol in the capital of Tamil Nadu, chennai, is priced at ₹76.07 and diesel at ₹68.74. During usual times, Indian oil companies adjust their price of petrol and diesel daily to meet crude oil prices, import costs and the rupee’s value in the international market. However, now that the Indian Government is too focused on dealing with the coronavirus, oil companies have taken their focus from these adjustments which has suspended the prices of petrol and diesel. 

The last time that prices for petrol and diesel was changed on March 16th. Indian oil prices are based on the Brent Crude Oil where oil prices hit its peak on January 11th. Ever since that point, petrol prices has been reduced by 10% and diesel prices by 8.5%. At the same time, Brent crude oil fell by $20 a barrel during these lockdown days.

What Has Made The Indian Oil Companies To Step On The Pedal?

Although Indian prices have remained stagnant during these lockdown days, crude oil prices on the international market has now surpassed $42 a barrel. As a result, Indian oil companies have raised the price of petrol and diesel for the first time after 80 days in order to keep up with the competition. In Chennai, the petrol prices has been increased by 53 cents to ₹76.07 and diesel by 52 cents to ₹68.74

From the last time when these companies adjusted the prices of petrol and diesel, a liter of petrol in chennai was ₹72.28 and diesel was ₹65.71 and this price lasted until May 3rd. However, on May 4th, petrol prices rose by ₹3.26 per liter to ₹75.54 where diesel prices rose by ₹2.51 per liter to ₹68.22.

Will the price still go up?

Now that this change has been made after such a long time, let’s see what the future of Indian oil prices will do to the country.

If crude oil prices fall in the future, it will hurt the income of many oil-rich countries. To avoid this situation, they have implement a reduction in production. This was one of the key reasons why Saudi Arabia and Russia began to stop pumping excessive oil. Looking at current situations, this strategy will work since many people are staying inside due to the lockdown. This has caused a reduction in the amount of oil that has been consumed for the past few months.

During the months of April and May, when most countries were under lockdown, OPEC decided to cut a production of 97 million barrels per day. As a result, the price of crude oil has increased which led OPEC countries and Russia to extend their low production till July. Therefore, if production continues to decline in the upcoming days, then the price of petrol and diesel will rise.

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