Will Petrol and Diesel Prices Fall Soon? Government Responds as Crude Oil Prices Ease

As global crude oil prices have finally cooled down, vehicle owners across India are naturally wondering when they will see a drop in petrol and diesel prices at the pump.

This expectation was recently addressed by Union Petroleum Minister Hardeep Singh Puri. "It's a perfectly fair question to ask for a price cut, but the government and oil companies are not quite ready to slash prices yet," he said.

This is why you won’t see prices falling any time soon – and what has to change before fuel is cheaper.

Oil’s Two-Month Cheap Delay

The main reason for stickiness in retail prices is timing. Oil marketing companies do not buy crude oil and sell it at the pump the next day. They usually buy oil at least two months before.

Indian refineries are now processing and selling crude bought weeks ago when international prices and shipping costs were sky-high. Today’s fuel is made from that expensive stock, so the recent fall in the world price of oil has not yet filtered through at the retail level.

Heavy Losses to Recover

Another big hurdle: The state oil companies remain in a financial recovery. When global oil prices spiked, the government maintained domestic fuel prices steadily, protecting consumers.

Oil marketing companies sold petrol, diesel and cooking gas below cost deliberately to keep the pump prices stable. This provided the public with a huge financial safety net, but the companies incurred a loss of about ₹74,781 crore as of June 30. The total under-recoveries, including subsidised LPG, were about ₹2.1 lakh crore. “These companies need a little breathing space to get the books back in order before cutting retail prices."

Private Retailers Lead the Way

The state-owned companies are stable, but the private sector has provided a little bit of respite. Nayara Energy was the first fuel retailer in the last two years to announce a steep price cut, bringing down petrol by ₹5 per litre and diesel by ₹3 per litre at its private outlets.

A national drop in fuel prices is not going to happen overnight. The government is watching the market closely. A formal review of retail prices is certainly possible if the international price of crude oil remains low over the next few weeks or months. For now consumers are going to have to ride out the structural lag and see if the global market stabilisation finally makes it to local petrol pumps.