Capitalmind Mutual Fund CEO Deepak Shenoy has reignited the debate over petrol and diesel prices in India, questioning why retail fuel costs remain elevated despite global Brent crude oil prices plummeting to a three-year low of $67.72 per barrel.
Calls for Price Reduction Amidst Global Decline
In a recent post on X, Shenoy highlighted that the current crude oil price is among the lowest recorded in the past three years. He argued that these sustained declines in international oil markets should translate into immediate relief for Indian consumers at the fuel pump.
“In case you missed it, we're back right now to levels last seen in Feb, at $67.72 per barrel in July. This is among the lowest in THREE YEARS. Should consider reducing fuel prices - see the OMC profits in the last three years to realize the oligopolistic price capture,” Shenoy wrote, pointing to the profitability of Oil Marketing Companies (OMCs) during this period.
These remarks echo concerns Shenoy had previously raised. He had noted that crude oil had dropped to approximately $70 per barrel after trading above $110, yet retail fuel prices saw no downward revision. He urged OMCs and the government to consider price cuts, asserting that India's fuel market operates as a "govt-led oligopoly" rather than a free market.
Unpacking India's Complex Fuel Pricing
The persistent gap between global crude prices and domestic retail fuel costs underscores the intricate nature of fuel pricing in India. While petrol and diesel prices are officially deregulated, their movement is not directly and automatically aligned with international crude fluctuations.
Several factors contribute to the final retail price consumers pay. These include the global crude oil price, the rupee-dollar exchange rate, refining and transportation charges, central and state government taxes, dealer commissions, and the strategic pricing decisions made by oil marketing companies.
Industry observers also suggest that OMCs frequently utilize periods of lower global crude prices to offset financial losses incurred during times when international oil prices surge, but domestic retail prices are held steady or increased marginally.
With Brent crude now hovering near a three-year low, Shenoy's renewed call brings a critical question back into public discourse: when will the benefits of significantly cheaper global oil finally reach the Indian consumer?