Attack on Saudi facilities sets oil on fire in India Sharpest Rise Since Budget; Pradhan Says Supplies Intact
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New Delhi: Pump prices recorded their sharpest rise since July 5 on Tuesday as tremors from Saturday’s drone attack at the heart of Saudi Arabia’s oil industry and the resultant explosion in crude prices hit India, even though domestic refiners continue to get Saudi crude.
As oil, financial and stock markets remained jittery, fuel retailers raised the price of petrol by 14 paise to Rs 72.17 a litre and diesel by 15 paise to Rs 65.58 in the Delhi market, the national benchmark. The quantum of increase was higher in states due to the incremental increase in local taxes.
This is the single-largest hike since the full Budget presented on July 5, which raised taxes to push up fuel prices by about Rs 2.5 a litre, as a result of the singlehighest spike in global oil prices on Monday. The global marker, Brent, had shot up nearly 20% and the US marker, WTI, some 16%. The prices later closed 15% up from their previous close. The
upward trend in oil prices globally has raised the threat of pump prices of petrol and diesel rising in India too, particularly since it comes on the back of a weakening rupee. If the government wants to, it can to a considerable extent reduce the impact on the consumer. It can cut taxes on petroleum products, which account for close to 40% of the retail price of diesel and about 50% of the petrol selling price. Considering that taxes were raised to shore up revenues when global oil prices were low, this would be only fair.
Oil minister Dhramendra Pradhan tried to calm nerves over supply disruptions, saying that Indian refiners were lifting shipments from Saudi Arabia, loading cargo both on Monday and Tuesday, but volatility was definitely a concern. “Certainly, when there is a spike in prices, it creates anxiety,” he told reporters here. “The events since Saturday are a matter of concern... We’ve lifted more than half of the contracted quantity for September. We lifted oil (from Saudi Arabia) yesterday (September 16) and even today (September 17),” he said on the sidelines of an event to award a contract for building a coal gassification unit for Talcher Fertiliser Ltd.
On Tuesday, global crude prices slid 5% on anticipation of early restoration of lost supplies, but the market remained wary as reports suggested that Saudi Aramco has warned four large consumers, including PetroChina, of shipment delays. Goldman Sachs has said oil prices could hit $75 if the Saudi outage drags for more than six weeks.
India is vulnerable to price volatility as it meets 83% of its crude requirement through imports. Saudis are its second-largest suppliers after Iraq and have become more important after the loss of Iranian and Venezuelan shipments due to sanctions.
Every $1 appreciation in Brent price inflates India’s oil import bill by $2 billion