India’s crude cost rose to $121.28 per barrel on Thursday, the highest since March 9, 2012 when it had hit $125.1. This has pushed the monthly average in June to $118.3 per barrel, a level last seen in April 2012 when the price averaged $118.6.
The decade-high crude cost will further shrink the bottomlines of state-run fuel retailers as they keep pump prices frozen and squeeze the government’s fiscal headroom harder by adding inflationary pressure and jacking up oil import bill, which impacts macro-economic parameters.
India imports 85% of its oil. The Indian Basket, or the mix of crude bought by India, follows the global benchmark Brent, which has 24% weightage in the mix. Brent has been on an upswing since last year as demand rebounded and supply remained tight, essentially due to OPEC+ grouping’s refusal — and in part, inability — to pump up the volume to the desired level.
While prices shot through the roof after February 24 when the Russia-Ukraine conflict broke out, state-run retailers did not raise pump rates — under informal government advisory — to match the pace of increase in oil prices. This ha s pushed up under-recoveries on petrol and diesel to Rs 18 and Rs 21, respectively.