Petrol to get cheaper by Rs.10/Litre.
Here's a bit of sunshine amid the forecast of economic
recession continuing in 2009. You can expect fuel prices to become cheaper by
Rs 10 a litre or so of petrol and remain that way through the year if the peak
winter trend in the international oil market is anything to go by.
Broadly, present petrol and diesel prices are in tune with $55-60 a barrel
crude level. By all indications, crude is unlikely to sustain that level this
year. The forecasts range between $30 a barrel by Goldman Sachs to $43 by JP
Morgan, at least in the first three months. The outlook is unlikely to change
drastically in the remaining months as demand forecasts, such as the one by
Deutsche Bank, too project more than a 1% decline.
That leaves the government plenty of
room to lower pump prices of at least motor fuels. Kerosene and cooking gas,
however, are another story. Despite the low international crude and petro
products prices, the lopsided subsidy mechanism still leaves state-run
oilmarketers with a loss on these two products. The oilmarketers are earning a
profit of roughly Rs 15 a litre on petrol and Rs 3 on diesel but lose Rs 17 on
a litre of kerosene and Rs 148 per cooking gas refill.
No wonder, the government is reworking its arithmetic and working out another
round of price cut for motor fuels -- and possibly cooking gas -- without
hurting the oilmarketers too much. Last week, oil minister Murli Deora told TOI
the cut could be expected later this month. Though the jury is still out, that
cut could be of the order of Rs 5 a litre of petrol, Rs 1-2 of diesel and maybe
Rs 20 per cylinder of cooking gas.
There may be further reductions down the road as it now looks certain that
oil's heady days are over -- at least in the near future. Oil has stumped
Opec's sharpest-ever production cut and failed to get excited by geopolitical
events. If taken as a full-year average, crude prices have dropped 54% in 2008
from $96 a barrel to a tad above $44 on December 31. In between, of course, it
created history by spiking to a little over $147 on July 11.
If anything, crude will stabilise at a level that will make a reduction in pump
prices comfortable for all stakeholders. Many industry watchers say a floor
will take time in coming until the market sees demand getting destroyed in a
sustained fashion. At that point, prices could first level off in the upper
$20-30 a barrel range before beginning to push back toward $50 in the third
quarter or so.
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