A thread on my piece around fuel price hikes. Come 10th March, sharp fuel price hikes are coming. How sharp ? $1 increase in Crude leads to a 50 – 60 paisa/ litre increase in retail fuel prices. Total increase could be as high as Rs 10/ litre. 1/7
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Govt & Oil Companies say they're protecting consumers. Guess what ? April '20 -Crude fell as low as $9.12/ barrel. What did Oil firms do ? Stopped price revisions for *82 days*. In May 21, we saw 16 fuel price hikes. Consumers were hit by no benefit & then record high prices 2/7
Any relief ? Yes. In November last year, a sizeable Rs 5/ltr cut in excise duty on petrol and a Rs 10/ltr cut in excise duty on diesel. But fuel earnings for the Govt have been frankly, great - A robust ₹ 4 lakh crores this year and ₹3.35 lakh crores project next year. 3/ 7
What does the Govt do now ? Bite the hand that feeds it or let oil prices set complete fire to inflation (Jan retail inflation at + 6%). A 1% rise in global oil price pass-through increases retail prices by about 7 to 8 bps and wholesale prices by 13 to 14 bps. 4/ 7
Here’s more. This on again-off again approach to fuel prices hits privatisation. Any wonder why BPCL’s sale is back in the freezer? So we don’t have enough reserves, we blow a bigger hole in our deficit ( fertiliser subsidies come to mind) and our currency becomes vulnerable. 5/7
Another fun fact : Asian countries pay more for the oil they purchase. Oil Minister Pradhan hit out at this ‘Asian Premium’ in 2018 asking “Why we have to give Asian premium? We must get reasonable and responsible price for our consumption.” No such demands this time round. 6/7
As Fmr Finance Secy @Subhashgarg1960 says,"By 2015 we had crude at $20/ barrel. The government reaped that oil dividend for 6 -7 years. Now the tide is reversing. There are no good choices. Luck may be running out” End of thread. #CrudeOil #oilandgas #oilprice #BPCL #StockMarket
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